Bert Kelly, “Sugar — sweet and sour,” The Bulletin, August 21, 1984, p. 135.
Fred has a bee in his bonnet about selling his sheep-wheat farm down here so that he can go to Queensland to grow sugar. I warned him that sugar prices were very low, so the industry was very sick at the moment, but he insisted that this was the right time to buy in. He said nastily:
I know it is your usual practice to buy cattle when they are dear and sell them when they are cheap but that is what has kept you poor, Bert. Wheat farms are selling well just now and sugar land is sure to be cheap because sugar prices are down, so I am going to have a look. Besides, it is lovely and warm up there and wet and cold down here. And they have that wonderful Uncle Sir Joh as their Premier so we wouldn’t have to contend with the creeping socialism that troubles us here. You can stay home, but I’m off.
So to Queensland we went. Getting away was easier than it used to be when we had to sneak past the bank where the banker always seemed to be looking out of his window. But both Fred and I have sons to run our places so the banker let us go without much fuss — and without much money, either!
We called in on Eccles in his ivory tower in Canberra as we drove north. Eccles does not know much about sugar-growing but, of course, that did not prevent him telling us how the industry should conduct its affairs.
Ignorance has never been a barrier to eloquence with Eccles. He told us that, in recent years, the sugar industry has been receiving very little — if any — subsidy from consumers or governments and has been in a fiercely competitive export market bedevilled by heavily subsidised EEC sugar. “But watch out, Fred,” Eccles warned, “the industry is controlled by the Queensland Government in a way a wheat farmer like you may not be able to understand.” But Fred and I knew that he was talking nonsense because everyone is aware that Queensland is the last bastion against socialism.
When we reached the sugar country, Fred went to see a land agent to give him the good news that he was in the market to buy a sugar cane farm — expecting that the agent would be all over him. But it wasn’t like that at all.
The first question the agent asked was not whether Fred had enough money but whether he was a fit and proper person, good enough to be allowed into the industry. This rather staggered Fred. He has always had a suspicion that farmers are more virtuous than other people but he did not realise that you had to demonstrate your virtue before you were allowed to start growing sugar. Evidently, with sugar, virtue is not something you accumulate as you get poorer by farming but you have to have it to start.
Having cast this shadow on Fred’s character, the agent warned him that, even if were as virtuous as Sir Joh himself, there was little chance of his being able to get his hands on an “entitlement” to grow sugar. Evidently, entitlements are a refined way of referring to quotas. They are given out very sparingly; only 16 since 1964.
It is no good having a farm unless you can get an entitlement and these are allotted by people already in the industry. It seems that the sugar cane can of worms hardly turns at all. Just how sick would the wheat industry be now if it had stayed in the same locations and in the same shape over the past 20 years? But, evidently, they hate change in the sugar industry.
Then the agent warned Fred that, even if his character were of the required high standard and if he were fortunate to know someone high up in the industry hierarchy and so got himself an entitlement, he should not delude himself that he could do what he liked on his own farm.
Evidently, a cane farmer is only allowed to grow cane on certain parts of his farm and an inspector comes around to make sure he is not using any others land on the sly. So rotating his crop around his farm to make the best use of its fertility, as we do with wheat, is not allowed. And everything has to be done as the inspector orders; you are not allowed to cut your cane quicker than the sugar mill and its inspector permit and, as we will see next week, the sugar mills also hate having their feather beds disturbed.
While this sad recital was in progress, I watched Fred’s enthusiasm evaporating. The sugar industry evidently hates change but this does not surprise me. Eccles always warns me that all people — even farmers — who get themselves comfortably settled on feather beds hate having to turn over, particularly to let others join them there.
Now that sugar prices are so low, sugar growers would no doubt appreciate having more feathers in their mattress. All the same, I think they would be better off without it.
Bert Kelly, “Sugar not so sweet,” The Bulletin, August 28, 1984, p. 136.
Last week I told how Fred had induced me to go with him to Queenland to see if he should sell his South Australian wheat-sharp property to buy a sugar farm. One reason for this was his conviction that, in Queensland, he would not have to suffer the creeping socialism that dogs us down here.
However, it has been a nasty shock for Fred to find that sugar growing is under the iron hand of the Queensland Government with the willing agreement of the sugar industry leaders who like being looked after even if it is bad for them.
I have had many sceptical enquiries about last week’s statement that Fred would not be allowed into the industry unless he could prove he was a person of good character. People seemed to think I must have made that up. But under section 37 of the Regulation of Sugar Cane Prices Act, applicants to buy land with an entitlement to grow sugar “must demonstrate that the prices or terms of a proposed sale, lease or sub-lease, letting or transfer, are not unreasonable or unfair and that the buyer or lessee is a fit and proper person to hold an assignment.”
There is nothing in writing in the Act about the desirability of being a member of a political party or secret society but no doubt this could be mentioned at the personal interview.
The same Act contains the stern injunction that the Central Sugar Board, when allotting entitlements to grow sugar, must have regard to “the provision of the utmost employment of labour economically possible under reasonable wages and conditions.” It is surprising they do not command their farmers to use horses instead of tractors to create employment.
Last week the land agent scared the daylights out of Fred by telling him how closely the Queensland Government controlled the way cane farmers managed their farms. This week we will take a quick look at how the milling side of the industry is controlled by the government, this last bastion against socialism.
I have before me a copy of the Queensland Government Gazette dated April 20, 1983, which spells out the regulations to control the relations between the Rocky Point Sugar Mill and the growers who supply it. I understand that these are typical of what is required for all mills. There are four closely-printed pages of the most minute directions about what has to be done and when. Crushing had to commence on August 2 this year (3.5 months ahead) and from then on all procedures were either spelt out in regulations or were under the control of the cane inspector who controlled everything else.
The land agent told Fred that the regulations direct each farmer to send his cane to a particular mill. The costs of transport are averaged over all suppliers to the mill, thus destroying any incentive to cut corners in transport.
Further, the allocation of cane to the mills is done on historical and equity grounds rather than on the basis of what is the best way to manage matters today. Yet conditions now are so different to those in 1915 when the industry arrangements seem to have been set in concrete. It is not surprising, then, to find that mill numbers and locations have remained unaltered for 60 years in spite of enormous changes in technology and the size of the industry.
The regulations that control the sugar industry are centred on protecting it from the discomfort of change. The industry was conceived and grew up in the sheltering arms of governments and it hates the thought of being weaned, even late in life. This dependence on government support explains the regulation which I quoted before that demands the maximum use of labour.
Cane farmers seem to have faced the traumas of change on their farms but they seem scared of change to their entitlement system and particularly to the way their cane is handled after it leaves their farm gates. Yet such changes are inevitable in the long run.
This is not only the opinion of wheat farmers such as Fred and I or even that know all Eccles. I quote now a retiring official of the Central Sugar Cane Prices Board, who said last year: “The regulations of the Sugar Cane Producers Act creak and growl like an old un-oiled windmill!” Those bushies who have such a windmill — and most of us have — will have a very clear idea of the behaviour of the sugar industry.
Fred came back home with his tail between his legs. He says that he never wants to hear another word about Uncle Sir Joh being the last bastion against socialism.
Bert Kelly, “A proper way to behave,”
The Bulletin, September 18, 1984, p. 150.
Eccles, Fred and I are back home after looking at Australia’s sick rural industries.
Fred returned satisfied that the farmers he had seen on his travels were even worse off than he was and this made him as happy as you could expect him to be. Eccles was happy, too, because he loves being miserable about industries. I was the only sad one.
I suppose I have enough political instincts left to want to be loved by all but spelling out the problems of sick industries is not the path to popularity. When I moaned to Eccles about this, he told me that becoming unpopular was a proper way to behave. He warned:
You must expect to be disliked, Bert, if you are doing your duty. Remember what the famous British economist, Alfred Marshall, said last century: “Students of social science must fear popular approval; evil is with them when all men speak well of them. It is almost impossible for a student to be a true patriot and have the reputation for being one at the same time.” So stop being sorry for yourself, Bert. You are not the first person to discover that telling people what they do not want to hear is not a popular pastime.
I suppose Eccles is right. The worst thing about him is that he usually is.
In the middle of April we began four articles setting out the problems and general principles that we expected to run into. Some of these were the inability of governments to set wise production goals, the dangers inherent in production quotas and cost of production marketing arrangements. There were some plaintive pleas that some industry leaders found it difficult to understand the convolutions in their own industries, let alone in others. You can imagine then how nervous members of parliament must feel about exposing their ignorance in public. This is why some industries have got into the mess they are in; no one has been game to give them the nasty medicine they need.
The whole system results in advantages for organisations and companies who are represented on boards and committees and, in doing so, tends to divide the industry into those “in the know” and those on the outside.
There was one common problem — the damage done by the European Economic Community to all our industries. Although it may make us feel better to castigate their wickedness, nothing we can say or do will alter them — particularly when we are not lilywhite. We will just have to adjust our production to their perfidy, unless we are prepared to go to war or something.
A pathetic belief persists that government and industry groups can set wise production goals. Limitations on production are set by allotting quotas, entitlements or assignments, to particular producers while denying them to others. This worries me more than it appears to worry producers, though we should realise that it is the industry leaders — those with quotas — who speak for their industries. The poor sods who are denied quotas are hard to hear; they are usually scared of criticising their industry leaders for fear of being regarded when the next quotas are handed out as not being fit and proper persons.
However, apart from the morality problem of giving one person a quota while denying one to his neighbour, there is a bigger problem in the system. A letter from a representative of the sugar millers said: “Production in the sugar industry is controlled to regulate output to meet available markets.” Well, their efforts have been singularly unsuccessful — as this table shows.
YEAR | PRODUCTION in 000 tonnes | PRICE $ per tonne
1974 | 2848 | $259
1975 | 2854 | $236
1976 | 3294 | $218
1977 | 3342 | $188
1978 | 2900 | $213
1979 | 2962 | $285
1980 | 3329 | $375
1981 | 3434 | $275
1982 | 3536 | $223
1983 | 3172 | $280 (est.)
Prices have fluctuated widely while production remains about the same. When the price was $188 in 1977, production was almost the same as in 1980 when the price was $375. I am not critical of them for making mistakes — I make them all the time — but I am critical of their thinking they can give wiser guidance than the market signals.
My mistakes are cancelled out by the mistakes of other farmers, some of which are often in opposite directions. But the mistakes that industries and governments make are always big ones. Also, the desire to be popular is usually stronger than the desire to be right.
Most of the industries in trouble were heavily regulated. The question is: Was this cause or effect?
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