China's COFCO joins Wilmar, MSF to sell Australian sugar in-house

SYDNEY, June 30 Mon Jun 30, 2014 12:28am EDT

SYDNEY, June 30 (Reuters) - The Australian unit of Chinese agribusiness COFCO Corp will stop selling sugar through an industry-owned marketing body from 2017, part of a shake up of the export model in the world's third-largest shipper of raw sweetener.

The move by Tully Sugar Limited comes after Wilmar International and MSF Sugar, owned by Thai sugar giant Mitr Phol, announced they would terminate agreements with industry-owned marketing body Queensland Sugar Limited (QSL).

A move away from a single marketing desk is being resisted by the growers that supply exporters as they say pricing could become less transparent.

But Tully Sugar said that after Wilmar and MSF had announced their departures it had little choice but to follow.

"The recent decisions by Wilmar and MSF Sugar to terminate their agreements at the end of the 2016 sugar season means that QSL loses more than 70 per cent of its critical export mass and its competitive marketing advantage," said Alick Osborne, chief executive of Tully Sugar.

"This presents unacceptable risks to our business and our growers."

Wilmar has said it decided to leave QSL as it should be able to achieve better pricing through its own marketing arm. MSF said it was concerned about the future of QSL without Wilmar.

The exit of the three largest sugar processors raises doubts about the future of the traditional single desk sales model.

QSL said it acknowledged a desire for a new marketing framework, but said a collaborative model was needed to avoid a collapse in the confidence of growers.

CaneGrowers, the industry body for Australian growers, described moves away from a single sales body as "farcical" because it would remove transparency for growers.

Australia is expected to produce 4.6 million tonnes of sugar during the 2014/15 marketing year, the Australian Bureau of Agriculture, Resource Economics and Sciences said earlier this month. (Reporting by Colin Packham; Editing by Joseph Radford)