Wilmar seeks sweeter relations with Australian sugar

Wilmar International is seeking urgent talks with Australia’s largest sugar marketing and logistics company this week to try to resolve a bitter two-year battle with cane growers over international marketing rights.

The dispute has become the latest battleground in Australia over foreign investment and has prompted senior government officials to warn that it risks undermining the country’s reputation as open to foreign investment. 

Singapore-based Wilmar has requested a meeting with Queensland Sugar Limited, which is controlled by growers and other sugar millers, to negotiate supply contracts for the 2017 season. The request follows angry exchanges between growers, politicians and executives at the company, which is one of Asia’s largest agribusiness groups. 

At the heart of the dispute is a decision by the Queensland parliament in 2015 to pass legislation partially reversing a 2006 deregulation of the sugar industry.

Before its monopoly was ended in 2006, QSL marketed all sugar produced by Australian mills. After deregulation, Wilmar and several other big millers notified QSL that they intended to withdraw. Cane growers, fearing a loss of influence and cash if QSL was cut out, successfully lobbied parliament to restore their right to decide which company could market sugar produced by millers — such as Wilmar — on international markets.

Wilmar says the 2015 law is anti-competitive and has forced it to delay a proposed A$75m investment in a new storage facility. The company, which bought Sucrogen, the sugar business of Sydney-based CSR, for A$1.5bn in 2010, has accused sugar growers and QSL of collaborating and using “political pressure and rhetoric” against it.

“It is a fact that QSL and some grower organisations are working together against Wilmar,” wrote Kuok Khoon Hong, Wilmar co-founder and chairman, in an email to Tim Nicholls, the leader of the Queensland opposition, and to Malcolm Turnbull, Australia’s prime minister, on December 20. 

“Several times during the past two years, unhelpful intervention at critical stages has frustrated our negotiations with growers and with QSL,” he wrote in the email, which has been seen by the Financial Times. 

The opposition Liberal National Party responded by blaming Wilmar for the breakdown in talks with sugar growers in 2014 over marketing contracts, leading to the 2015 legislation. QSL did not respond to a request for comment.

The dispute is the latest in a series of controversies involving foreign investment in Australian agriculture. 

Last April the federal government blocked the takeover of S Kidman & Co, one of the country’s largest landholders, by Chinese investors. In December 2013, just months after winning power, the Liberal-National coalition rebuffed US-based Archer Daniels Midland’s proposed A$3.4bn takeover of GrainCorp, one of the country’s biggest grain handling companies. 

“The mood is darkening on foreign investment, immigration and the issue of foreigners taking Australian jobs,” said Duncan McDonnell, lecturer at Griffith University.

Sugar growers say Wilmar is breaching the 2015 legislation by refusing to agree a supply agreement with QSL, which would enable the company to market sugar on international markets 

“We want choice and transparency but Wilmar are treating the law with contempt,” said Kevin Borg, chairman of Cane Growers Mackay, an industry body.

The partial re-regulation of an industry that generates A$2bn of exports a year has prompted concern among senior government officials, including the chairman of Australia’s Foreign Investment Review Board.

”If we start treating our foreign companies as second-class citizens once they are here, we will cause huge damage to our economy,” he told The Australian Financial Review.