Home / Sugar News / Sugar industry report reveals $220 million potential benefit from water pricing reform

Sugar industry report reveals $220 million potential benefit from water pricing reform

8 April 2020 | An assessment released by the Australian Sugar Milling Council (ASMC) shows that a 25% reduction in the cost of water from the State’s sugarcane irrigation schemes* could deliver up to $220 million in additional output over the 4 year period 2020/21-2023/24.

ASMC’s analysis was undertaken after the Queensland Competition Authority (QCA) made a recommendation to Government to introduce further, significant increases in costs to irrigators over the period 2020 to 2024.

In the report ASMC analysed the costs and benefits from a social, economic and environmental perspective of 15% and 25% reductions to water scheme prices over the period.

  • The QCA recommendations represent a 4% per annum increase for cane irrigators between 2006/07 and 2023/24 (from $39 million in 2006 to $79 million by 2023/24).
  • Water represents upwards of 15% of a cane irrigator’s total farm costs.
  • Stagnant productivity, falling cane volumes and mill under-utilisation could threaten the viability of some sugar mills.

“With 67% of the state’s sugarcane production dependent on irrigation, inputs like water need to be affordable and reliable,” said David Pietsch, ASMC’s CEO.

“And the Government’s decision comes at a critical time, with sugar and cane prices at decade lows, regional economies hurting and grower utilisation of water allocations falling,” added Mr Pietsch. 

“We are calling on the Queensland Government to reject the QCA recommendations and reset water charges to levels 15-25% more affordable than that proposed by the QCA over the 2020/21-2023/24 period,” concluded Mr Pietsch.

According to ASMC’s Director of Policy, Economics and Trade David Rynne, the Government’s decision comes at a critical time, with sugar and cane prices at decade lows, regional economies hurting and grower utilisation of water allocations falling. 

“Our analysis has looked at the water price levels needed to maximise community returns for our endowment of water and vast cane lands”, said Mr Rynne.

“The scenarios we’ve modelled show that both a 15% and 25% price reduction would result in  increased and efficient water use that would deliver both cane yield improvements and tangible benefits to the community that exceed the costs.

“Let’s be clear, the benefits of improved price incentives are four fold and include shoring up mill viability, regional development in terms of higher sugar, molasses and energy production, environmental improvements including improved utilisation of nitrogen and herbicides and ensuring the state’s water assets don’t become stranded assets,” Mr Rynne concluded.

ASMC’s report Irrigation Prices in the Queensland Sugarcane Regions: an analysis of the community benefits and costs of improved irrigation pricing together with Queensland and regional profiles and the economic modelling prepared for ASMC by Lawrence Consulting can be found here Economic Impact of Improved Irrigation Pricing on the Queensland Sugar Manufacturing Industry.

*Mareeba-Dimbulah, Burdekin-Haughton, Pioneer River, Eton, Bundaberg and the Lower Mary River Water Supply Schemes (WSSs). See profiles for each WSS.

Top