波士頓諮詢公司：糖業競爭分析報告.docx

BCG REPORT TO CANEGROWERSReview Of Constraints On Industry Competitiveness And Innovation21 January 2003FOREWORDThis report was prepared by The Boston Consulting Group in a six week period duringNovember and December 2002We were commissioned by CANEGROWERS toConduct an analysis of current regulations and industry practices, especially, but notexclusively, in the areas proposed for study by the governments MoU, including thebenefits to growers of the present system, limitations of the present system,especially with respect to innovation, and the need for changes in the Act toameliorate the present systemIdentify issues relating to the single desk approach-possible changes and mechanisms for change including domesticderegulationimpact of these changes on growersOur approach involved five steps20030121-SYD-FIN-40517-00 Final.pptDeveloped a baseline of information on the industrys competitiveness andinnovationIdentified the range of opportunities that could significantly increase industry returnsInterviewed industry participants to collect arguments as to how the Act preventsrealisation of the opportunitiesAssessed these arguments by reference to actual industry economics and casestudies from other agricultural industries and ensured the likely costs and benefits ofderegulationIdentified potential pathways for changes to industry regulation and the likelybenefits as well as costs and risks-1-CONTENTSA.B.C.D.E.F.The Challenge Facing The Queensland Sugar IndustryProductivity Improvement OpportunitiesValue Adding OpportunitiesConstraints On The IndustryAn Assessment Of Deregulation As A Response To ConstraintsPossible Directions For Reform20030121-SYD-FIN-40517-00 Final.ppt-2-SUMMARY OF FINDINGS (I)A.The Queensland sugar industry faces a significant challenge to survive andprosperTo get back to reasonable profitability it must increase returns acrossthe industry by, on average, $1,000/haB.C.D.Productivity improvement opportunities could fill this gap, but would require afundamental step change in industry performanceValue adding is another potential source of benefit and must be pursued.However the current business cases for the most discussed opportunitiesappear marginalThe industrys ability to respond to this challenge is indirectly constrained bythree factors20030121-SYD-FIN-40517-00 Final.pptA misaligned risk/reward profile for growers in their relationship withmillersLack of competitive pressure within layers of the value chain because ofboth geographic and legislative factorsLow pressure for change and high barriers to change given bothlegislative restrictions and industry history-3-SUMMARY OF FINDINGS (II)E.Simple deregulation is unlikely to be an effective response to the industryschallengesDeregulating CPA and collective bargaining would remove manyconstraints, but not all, and would significantly redistribute income fromgrowers to millersDeregulating Acquisition would put significant benefits at risk and moretargetted reforms are available to avoid any impact of the single desk oninnovationF.However, fundamental improvement in industry performance is required. Theindustry must investigate both20030121-SYD-FIN-40517-00 Final.pptA combination of cooperative industry action and targeted deregulatoryreform to address many of the opportunities for improvementFundamental changes to the structure of the industry to provide thebasis for a more dynamic, competitive and innovative industry-4-A. THE QUEENSLAND SUGAR INDUSTRY FACES ASIGNIFICANT CHALLENGE TO SURVIVE AND PROSPERA1. Global competitive pressures have significantly increased, placing the industryunder serious pressureA2. Levels of return in the industry are unsatisfactory, and this is only partly due torecent poor yieldsA3. Assuming a return to average yields, an average earnings improvement of$1,000/ha is required to return to 1998 levels of profitability$700/ha for growers$300/ha for millersA4. Looking forward five years, given likely cost and price pressures, an additional$150-550/ha could be required to support a healthy industryA5. These findings are generally consistent with those of the CIE20030121-SYD-FIN-40517-00 Final.ppt-5-A1. GLOBAL COMPETITIVE PRESSURES HAVE SIGNIFICANTLYINCREASED, PLACING THE INDUSTRY UNDER SERIOUS PRESSURETwo global competitors have boosted their volumes in a low growth marketBrazil has emerged as a major industry participant with a low cost positionversus Australia, partly driven by a substantial devaluation of the BrazilianrealEU white sugar exports have also increased somewhat (but are less likelyto grow in the future)As a result, sugar prices have declinedThe Queensland sugar industrys high exposure to world prices has placed it underenormous pressure and may even threaten its survival in its current form20030121-SYD-FIN-40517-00 Final.ppt-6-PARTLY DUE TO DEVALUATION, BRAZILHAS A SIGNIFICANT COST ADVANTAGEWorld Produced Raw Sugar Cost Curve(1): 2001Cost 18(US/lb)(US/lb)1614121086420Based on 1997exchange rate(2)020406080(1) Costs before depreciation, interest and tax(2) Brazilian exchange rate 1997 1.2; Brazilian exchange rate 2001 2.5Source: LMC; ISO; International Financial Statistics Yearbook; BCG Analysis20030121-SYD-FIN-40517-00 Final.pptCumulative Volume(Mt)-7-BrazilSwazilandGuatemalaColombiaAustraliaThailandSouth AfricaIndiaUnited StatePhilippinesMexicoOthersChinaWITH EXPANSION IN SUGAR PRODUCTION,EXPORTS FROM BRAZIL (AND EU) HAVE INCREASEDBrazil Has Expanded And ExportedMost Of Its Increased Production.Brazilian Sugar Production And Exports(Mt).And EU Has Also IncreasedExports Of Beet SugarEU White Sugar Exports(Mt)16.419.220.716.520.314.712.56.26.1199619971998199920002001199619971998199920002001ProductionExportsSource: ISO20030121-SYD-FIN-40517-00 Final.pptMarket growth is 1%-8-THE INCREASE IN BRAZILIAN EXPORTS HASCREATED PRICE PRESSURE ON RAW SUGARWorld Sugar Export Cash Costs And Volumes: 1997(US/lb)1412World Sugar Export Cash Costs And Volumes: 2001(US/lbaw Sugar Price1086420Raw Sugar Price05101520250510152025Cumulative Traded Volume(Mt)Note: Excludes depreciation, interest and taxSource: LMC; CANEGROWERS; ISO; BCG Analysis20030121-SYD-FIN-40517-00 Final.pptCumulative Traded Volume(Mt)-9-GuatemalaBrazilColombiaSouth AfricaAustraliaThailandBrazilAustraliaGuatemalaSouth AfricaColombiaThailandAUSTRALIA IS HIGHLY EXPOSED TO THE WORLD PRICEAustralias High Exposure(1)To The World Sugar Price.World Price ExposureOf Sugar Revenues: 2001(%).Results In VerySensitive RevenuesImpact On Sugar Revenues ResultingFrom 1/lb Decrease In World Sugar Price(%)ColombiaSouth AfricaThailandGuatemalaQueenslandBrazil(2)37.349.15063.068.598.1-12.3-8.3-8.9-5.1-6.6-6ColombiaSouth AfricaThailandGuatemalaQueenslandBrazil (2)0.020.040.060.080.0100.0-14.0-12.0-10.0-8.0-6.0-4.0-2.00.0(1) Exposure is defined as the proportion of sugar revenues linked to the world price(2) Only half of Brazils cane industry is exposed to sugar price, with the other half exposed to ethanol. The dotted line shows the exposure of the sugar industry, thesolid bar shows the exposure of the cane industrySource: ISO; QSL; BCG Analysis20030121-SYD-FIN-40517-00 Final.ppt- 10 -AS A CONSEQUENCE, IT IS DISADVANTAGEDIN THE TRADED SUGAR MARKETWorld Sugar Price Required For Cash Break-Even For Major Trading Countries: 2001(US/lb)86Heavily protected bydomestic marketsWhile exposed to worldprice, advantaged bylower cost base andsupported by ethanolusageDownward pricepressure will place theQueensland SugarIndustry under threat420-205Thailand10Brazil1520Queensland25-4-6GuatemalaSouth AfricaCumulative Traded Volumes(Mt)ColombiaNote: Excludes depreciation, interest and taxSource: LMC; ISO; International Financial Statistics Yearbook; BCG Analysis20030121-SYD-FIN-40517-00 Final.ppt- 11 -A2. CURRENT INDUSTRY RETURNS ARE UNSATISFACTORYReturns for both growers and millers have been unsatisfactory for the last threeyears - 1998 was the last year of reasonable returnsPoor returns have been driven by low prices and poor volumes. Slightly increasedinput costs have also contributed2002 offers little prospect of reasonable returns as a return to average yields will beoffset by falling prices20030121-SYD-FIN-40517-00 Final.ppt- 12 -RETURNS FOR BOTH GROWERS AND MILLERSHAVE BEEN UNSATISFACTORY FOR THREE YEARSGrowers EstimatedAverage Operating Profit/Loss($000s)Mills: Return OnCapital Employed(3)(%)Mackay Region(1)MaryboroughProserpine6639Reasonablereturns(2) $40k pa1512Reasonablereturns at 1998 levelimplies a 2% increase104.04.5-30-32122.2-75-0.397989900019798990001979899-3.50001(1) Based on average farm size of 100ha assuming 80ha harvested and 20ha fallow. Profits after imputed labour cost and depreciation, but before interest and tax(2) Reasonable return based on 5% return on value of cane farming land, where an 80ha harvested farm is valued at 100ha $8,000/ha (current land price)(3) Return on capital employed = EBIT (Total Assets Non Interesting Bearing Liabilities)Source: ABARE; Mackay Sugar; Maryborough Sugar Factory; Prosepine; CANEGROWERS; BCG Analysis20030121-SYD-FIN-40517-00 Final.ppt- 13 -ESTIMATED GROWER EARNINGS(1)Line ItemPool priceCCSTonnes of cane/haCane RevenueSpecial Distribution AllowanceTotal RevenueHarvestingTotal harvesting costFuel and OilR&MFertiliserChemicalsIrrigationPlantingPesticidesTotalHectare based costsInsuranceRegistration/licensesFuelRatesElectricityImputed WagesAdminOther expensesFarm based costsTotal Cash CostsDepreciationProfit after depreciationUnit$/tunitst/ha$/t$/ha$/ha$/ha$/ha$/ha$/ha$/ha$/ha$/farm$/farm$/farm$/farm$/farm$/farm$/farm$/farm$1997335.0814.395.7241,9881,531243,5196.5950,45044.4490.56337.5073.3888.61188.892.67826.0566,0842,5001,4003,0007,00030032,5003,5101,00051,210167,74410,20065,5751998352.3512.1106.5224,6351,704226,3406.6756,81249.1192.88341.1873.4589.50190.222.67839.0067,1202,5541,4143,3157,20830533,2343,5741,01852,623176,55510,40439,3811999254.5013.581.1145,4801,298146,7786.7443,76854.2695.27344.8973.5190.39191.562.67852.5668,2052,6091,4283,6637,42231133,9853,6391,03754,094166,06710,612(29,901)2000253.0012.655.990,45691,3516.8230,52659.9697.72348.6573.5891.30192.912.67866.7869,3432,6661,4424,0477,64334,7533,7051,05655,628155,49710,824(74,970)2001331.6014.851.3134,384821135,2056.9028,31366.25100.23352.4573.6492.21194.272.68881.7270,5382,7241,4574,4727,87032235,5383,7731,07557,230156,08111,041(31,917)(1)Based on average farm size of 100ha assuming 80ha harvested and 20ha fallowed. Profits after imputed labour cost and depreciation, but before interest and tax.Mackay regionSource: ABARE; Mackay Sugar; CANEGROWERS; BCG Analysis20030121-SYD-FIN-40517-00 Final.ppt- 14 -POOR RETURNS HAVE BEEN DRIVENBY LOW PRICES AND VOLUMESDrivers Of Queensland Sugar Industry Revenues: 1996-01Raw Sugar Pool Price: 1996-01(A$/t)400300334.6335.1352.4254.5253.0331.6Raw Sugar Revenues: 1996-01(A$b)20010002.01.51.01.4x19961997 1998 1999 2000Raw Sugar Produced: 1996-01(Mt)20010.0199619971998199920002001655.14.04.43210199619971998199920002001Source: CANEGROWERS; Thompson Financial Datastream20030121-SYD-FIN-40517-00 Final.ppt- 15 -FALLING WORLD PRICES WERE SOMEWHATOFFSET BY A WEAKENING AUSTRALIAN DOLLARDrivers Of Raw Sugar Pool Price: 1996-01Raw Sugar NY No 11: 1996-2001(US/lb)1510Raw Sugar Pool Price: 1996-015(A$/t)04001996199719981999200020013002001003352031561291641905020367264fA$ Versus U$:1996-0101996199719981999200020011.00.20.0Impact due to depreciating A$199619971998199920002001Estimated pool price at 1996 exchange rateSource: CANEGROWERS; Thomson Financial Datastream20030121-SYD-FIN-40517-00 Final.ppt- 16 -QUEENSLAND SUGAR VOLUME HASBEEN DEPRESSED BY LOW CANE YIELDSDrivers Of Raw Sugar Volumes: 1997-01Raw Sugar/Cane(%)201514.212.613.813.714.6105019971998199920002001fRaw Sugar Produced(Mt)63.94.4x20Harvested Area(000 ha)19971998199920002001500400398386421422440300200100019971998199920002001Low cane yieldsimpacted by adverseweather, pest anddiseaseSource: CANEGROWERS20030121-SYD-FIN-40517-00 Final.ppt- 17 -Cane/Area(t/ha)15095.9 96.587.81005001997 1998 199968.2 67.82000 2001Raw Sugar/Area(t/ha)15 13.612.1 12.110501997 1998 19999.99.42000 2001INCREASED INPUT COSTS ANDHIGHER UNIT COSTS HAVE CONTRIBUTED150Farm Input Costs (Except Fuel)Have Risen SlowlyFarm Input Prices: 1996-01(Indexed)Fuel And Oil706050But Lower Yields HaveDoubled Costs Of ProductionEstimated Farm Costs Of Production(1): 2001($/Tonne Cane)Mackay 2001 Yield100ChemicalsFertiliser40302010Mackay 1998 Yield501996199719981999200020010406080100 120Tonnes Of Cane/ha(1) Based on average farm size of 100ha, assuming 80ha harvested and 20ha fallow; Costs include imputed labour cost and depreciation, but exclude interest and taxSource: ABARE; Mackay Sugar; CANEGROWERS; BCG Analysis20030121-SYD-FIN-40517-00 Final.ppt- 18 -RETURNING TO TRENDLINE YIELDS IN 2002 WILLHAVE A SIGNIFICANT IMPACT ON RETURNSQueensland Yield1614121086420(Raw Sugar Tonnes/ha)Factors Contributing To LowerYields In Last Three YearsExtreme weather conditions Unseasonal rainfall and floods Cyclones DroughtPests and disease Native rats Orange rust Cane grubs19