CANEGROWERS Around the Paddock
CANEGROWERS advocates on behalf of sugarcane growers in Australia. This podcast series examines some key issues and challenges and celebrates the successes.
CANEGROWERS Around the Paddock
Talking Trade - The Sweet Truth About Sustainable Sugar
This month's sugar market update explores sustainable sugar's value in the global market, with guests Lindsey Perry and Matt Kealley from CANEGROWERS Brisbane sharing their expertise on sustainability certification and market access.
- Sugar prices currently volatile at around 16.5 cents per pound, with 2025 season at $550 AUD per tonne
- Forward prices showing higher values for 2026-2028 seasons, indicating current selling pressure
- Smartcane BMP program already delivers value through access to premium markets like Japan and US
- Developed markets use 75% of sugar in industrial food and beverage production, driving sustainability requirements
- Major buyers like Coca-Cola recognise Smartcane BMP as meeting their sustainability criteria
- Smartcane BMP celebrates 10 years with an impressive 95% grower retention rate
- New ESG reporting regulations beginning January 2025 will impact sugar supply chain
- Module 4 of Smartcane BMP being developed to address greenhouse gas reporting and modern slavery requirements
- Mass balance approach currently used for sustainable sugar, with potential future premiums for certified growers
- Australian sugar industry uniquely positioned with independent growers rather than plantation model
Visit the Smartcane BMP website to learn more about Module 4 self-assessment, which will be available in the coming weeks.
Hello and welcome to the Cane Growers Marketing Information Service update for June 2025. This is Dougal Lodge to give you a quick update on the sugar market and this month we're going to have a talk about sustainable sugar and the value of sustainable sugar in the global sugar market and the value of sustainable sugar in the global sugar market. Just like to introduce our guests for today We've got Lindsay Perry and Matt Keeley, both from the Cane Growers team here in Brisbane but tremendous experience in this area, so just let you guys quickly introduce yourselves. Lindsay, obviously welcome aboard to Cane Growers. Be great to maybe just explain a bit about your role and a bit of your background.
Speaker 2:Thanks, dougal. Yeah, so my name is Lindsay Perry. I've come on board in the last couple of months as the new program manager for Smart Cane BMP as I've spent that couple of months trying to get around to some of the districts. We've been up in the wet tropics in the Burdekin and we'll be going down to central Mackay and southern regions in the next couple of weeks. So yeah, great to be on board.
Speaker 1:Very good, and what's your background before you joined the sugar industry?
Speaker 2:My background has been quite varied, but all in agriculture. I came to Australia in 2010 and got involved in the beef industry, worked in extension and research and development for the last probably 10 years across Northern Australia, living in areas like Cloncurry, Georgetown and the Tablelands for a brief time as well, so not completely unfamiliar with the North.
Speaker 1:And Matt, you've been a bit of a veteran of sustainable sugar here at Cane Growers for a long time, so maybe just introduce yourself and your role at Cane Growers and a bit of background on how you've been part of the sustainable sugar journey here in Australia.
Speaker 3:Thanks, dougal. Yeah, and g'day mate, how are you. Good to see you, and hello, listeners, matt Kearley, I've been with Cane Growers 16 years now, which has gone very quickly, but it's been quite a journey. I started at Kangaroa in 2009, and I was the Environment and Sustainability Manager back then and I suppose for that 10 years I did that job. We kicked off Smart Can BMP and we really dug into the sustainable sourcing work that the buyers of sugar were asking for at the time. So that was a challenging and exciting period of my career here at Cane Growers and now I'm in the membership engagement innovation space, so working with our growers on membership.
Speaker 3:Looking to the future, what does our organisation look like in the next sort of 5, 10, 20 years? Who will our members be? How do we encourage those younger growers to be members of Cane Growers? But also how we make sure we provide value. Who will our members be? How do we encourage those younger growers to be members of Cane Growers? But also how we make sure we provide value back to our members and the growers in the industry? And I think the work we do here around sustainable sourcing and the work that's coming through and the needs around ESG is super important both to Cane Growers, our growers, our members in the industry.
Speaker 1:Yeah, great Thanks, Matt. So would it be okay to call you the godfather of the Smart Cane BNP program then?
Speaker 1:I think that's probably a bit strong, but if you like, so before we jump into the background of the value of sustainable sugar, just to give you a quick market update, prices have been very volatile over the last month. We've obviously had lots of geopolitical tensions in the Middle East. Oil prices went up about 12% last week, early June, which didn't see any follow-through on sugar prices, unfortunately. So sugar prices are still down around 16.5 cents a pound, which is getting near the cost of production in Brazil and other producers. So we're at the low end of the range. In terms of Australian dollars per tonne. We're now seeing about 550 Australian dollars per tonne in the 2025 season, which is some of the lower prices we've seen over the last couple of years.
Speaker 1:But what's really interesting is, in the past we've talked about how, in a deficit market, the prompt price, or the near price, trades at a higher price than the forward market. We've now seen the opposite. So now we're seeing the $5.50 per tonne in the 25 season is lower than the forward prices. So we're seeing prices out near $5.60 in the 26, $570 in the 27 season and $580 in the 2028 season. So we're seeing higher prices the further out we go in the next couple of years.
Speaker 3:So, dougal, not having the same experience as you in this marketing area and pricing area, but that hasn't happened before.
Speaker 1:It has happened before. So we do see the forward prices being higher than the prompt price, typically when there's a surplus of sugar in the prompt market. So what this is telling us at the moment is that there's definitely selling pressure in the 2025 season contracts and that's probably because we're seeing speculator selling. So that's one thing that's been happening. So seeing speculator selling okay, so that's one thing that's been happening. So the speculators have been selling sugar futures. And we're also seeing some of these larger crops coming through in the northern hemisphere, which we've been talking about for quite some time now.
Speaker 1:So the, the, the, the high prices from last year has prompted higher production and now we're starting to see that hit the market. And because most of these other industries, matt, can't do forward pricing like Queensland, their only selling activity is in the prompt in the next year or so. So that's why we see more selling pressure. So, again, what that means for us is does it say that we're going to see lower prices in the future? Probably, we can't predict that, but what we do know is that right here and right now, we're seeing more sugar on the market available than we have seen for quite some time.
Speaker 3:Okay, Thanks, mate.
Speaker 1:So we might move into talking about how does sustainable sugar fit into the sugar prices and the prices in the market. So to start with, we'll start with the explanation of where it sits first, and then we'll go through a bit of the detail for everyone to understand and then we'll talk about what makes up sustainable sugar. So the first thing is lots of growers are probably very sceptical about the value of sustainable sugar and saying, oh, I'm seeing nothing yet. So first thing to talk about is that we actually are already seeing value for sustainable sugar. So the first piece is in our number 11 sales. So when we sell sugar in the Asian region, we're already receiving value for that in terms of the markets that we access. So at the moment there is a premium for accessing the Japan market versus other markets in the region and Japan trades at a premium. This is then flowing through into the shared pools. So when you see your shared pool results over the last couple of years these have been extraordinarily high shared pool results. Part of this is because we've had access to the Japan market. So that difference has been up to about $20 per ton. If we didn't have sustainable sugar, we probably wouldn't have been able to access the Japan market. So that's number one. So we've definitely got some value already from having sustainable sugar, because the end users in Japan are asking for that.
Speaker 1:The second part is America accessing the US quota. So we're seeing a lot of development of sustainable sugar requirements out of the USA. They're probably one of the leading countries in this area and so accessing the US quota, providing sugar to the US quota, getting additional quota, is linked to our credentials as being a sustainable sugar producer. So even though we're not seeing a direct $2 a tonne or something specifically called out in our contracts, we are getting the benefit of accessing premium markets like the US and Japan. So when we talk about these requirements, so it's important to understand well where is the sugar actually being consumed.
Speaker 1:And so when we look at the global sugar market, typically we see developed countries use about 75% of their refined sugar is in food and beverage, industrial consumption, and so that industrial consumption is the likes of Coca-Cola, pepsi, unilever, nestle big multinational companies there, the big sugar consumers globally, but they're also very big in these developed markets. So 75% in the developed markets by comparison in the developing markets like Indonesia, nigeria, india, other big consuming markets out there, the developing markets, only about 25% by comparison is consumed in these industrial sugar users the food and beverage users. So what that means is that there's a much stronger requirement for sustainable sugar coming from the developed markets, the big markets, so the EU, germany, usa, japan and Australia. So our developed markets is where we do see a lot of requirements for sustainable credentials and assurances as compared to the developing markets, because in general, there's just not as much food and beverage consumption happening in those developing markets. So when we look at that and we talk about, what does this actually mean?
Speaker 1:Cane growers has been engaging with a number of these big end users for a long time, and so I know, matt, you've been working on this. You've been promoting Smart Cane BMP for literally almost a decade and a half. You've been talking to a lot of these big end users, like Coca-Cola and others, and been seeing them at various conferences over the years. What do you think they're looking for?
Speaker 3:Let's set the scene Dougal. Picture a mother standing in a supermarket aisle. She flips over a bag of sugar not to check the price but to see where it's come from. And she's not just buying sweetness, she's buying trust Trust that was grown in a way that doesn't harm the environment or the people that help produce it. Now here's the twist. This is where I think it's important.
Speaker 3:What she's looking for is already growing in Queensland, and Smartcam BNP is already on the path to meeting these global expectations of sustainable sourcing and ESG reporting, and most growers don't fully realise we're already part of this solution. Smart Can BNP is part of this solution. Accessing these markets where Coca-Cola and Nestle buy the sugar that we export overseas into those markets you're talking about, it gives us enormous credibility to get our sugar into these markets and maintain access to those markets, get access to those premium markets which pay more and hopefully leverage some further value for the growers in doing so. Following that, cangrowers has been working since 2015 on trying to align SmartCan BNP with the international standards. So there's three main international standards out there that are sort of recognised by buyers of sugar. There's the Bonsucro standard, there's the Proterra standard, which comes from the EU.
Speaker 3:And then there's the what's? The third one, mandy. Come on Vive, vive, that's right. Third one, mandy. Come on VIVE, vive, that's right. The VIVE program, which is based out of the UK, which is part of Zonicow. These are continuous improvement and sort of sustainability frameworks or benchmarking programs, and SmartCan BNP has worked pretty hard since 2015 to align and benchmark our program against those programs to demonstrate to the buyers of sugar that the practices that the growers are doing in Queensland tick the boxes required for sustainability and then give confidence to the buyers of sugar, like the Cokes and the ASRs and the Japanese market, that the sugar that they're sourcing from Queensland is sustainably produced and the cane market that the sugar that they're sourcing from Queensland is sustainably produced and the cane that was grown was grown in a way that meets the sustainability needs of buyers and the consumers who are asking for it.
Speaker 1:Yeah. So one thing when you think about sustainable sugar and again, so this is linking to products which have to be set they're proving that they are sourcing sustainable sugar in their end-user products, whether it's a can of Coke or a KitKat, et cetera. But when we look at that supply chain, so there's a food manufacturing business. We then have the sugar refinery. So the sugar refinery might be local, but they could be in a place like Thailand, like Midpol would have their own refined sugar that they export, for example. We then have the raw sugar mill, so there's the raw sugar milling company, and then we have the cane and the cane supplier. So that's one of the things I find quite interesting is that if you look at the models that are out there around the world, typically like, even somewhere like Brazil 75% of the cane comes from plantations which are owned by the milling companies and we have lots of um. You know examples around the world where there's very small farming, um enterprises, like maybe one hectare type farmers, whereas in australia and some of these other developed markets like the eu and the usa, etc. Farm sizes are much bigger, aren't they? So that's as a this is where it's very interesting.
Speaker 1:Um for sugar, because you can't apply a plantation-style model here in Australia, and that's why I think my personal view is that smart cane plays a very important role, because the growers on the ground are the ones doing the work. It's not actually being managed by someone in the mill, which is what happens in some of the other countries. So this is where it's a very different model for us here in Australia, and I think what I've heard it'd be great to hear what you've heard too, matt. It seems like smart cane is globally recognised as a leading practice in terms of assurance for sustainable sugar cane production, and I don't think there's too many other examples of a bottoms-up program like what we have here with smart cane BMP. I don't think, oh, too many other examples of a bottoms-up program like what we have here with Smart Cane BNP, I don't think.
Speaker 3:Oh, that's correct too, glenn, and that's, I think, the point of difference with the Queensland industry, but also the opportunity and challenges that come with it. So part of it's educating the buyers of sugar that in Queensland the growers are growing the cane and supplying it to the mill sugar, that in Queensland the growers are growing the cane and supplying it to the mill, whereas, as you pointed out, in most other regions the mill has a great say in how the cane's produced in the first place. So explaining the actual transition from cane to the mill and through the supply chain and getting our buyers of sugar from international markets to understand that is our first opportunity, but also challenge. And once they sort of craft that, they then realise the importance of how smart BNP supports head-on farm sustainability and continuous improvement on farm. And so when we talk to, say, coca-cola, the Coca-Cola company in the US have principles for sustainable agriculture which they require in their company and also their botany companies around the world to support, which have basically conditions around biodiversity and environment and where plastic after the safety and human rights and all those things that tie into sustainably sourced sugar and how it's grown, how it's produced and how it's provided to the market and so Coca-Cola, through their program, evaluate various standards and they've evaluated Smart Can BNP and Smart Can BNP is being considered a leader standard in that from Coca-Cola, which means it meets the criteria for them when they're sourcing sugar.
Speaker 3:So that gives us a great tick, if you want to put it that way, in the box to say, coke can have assurance and trust that they know when they're buying the sugar from Queensland, they know that the practices that grew the cane in the first place meet their conditions. So they have confidence that we are providing that sustainable tick but also meeting some of those needs that they have, particularly around greenhouse gas or making sure people are supported. So there's a whole range around people and management, workplace health and safety, but also the practices that are used around our fertilizer use and chemicals and the way cane's grown. We can demonstrate that we tick those boxes and they can have assurance for that. Yeah great.
Speaker 1:That's really interesting, matt, and I think if we look at a market like the USA market, where they use fructose, they actually don't use sugar, so Coca-Cola is not a very big sugar user in the USA, but we have the big candy companies, like the confectionery companies are massive right, so big sugar consumers over there. So a market like the USA obviously a big market for us, important market for us. What are you seeing happening in the USA?
Speaker 3:Oh, indeed, indeed.
Speaker 3:And American Sugar Refining, ASR.
Speaker 3:They've been over to Queensland since 2017 to see how the sugar cane is grown here in Queensland and how it's milled, to make sure that the practices that the industry use meet their expectations and criteria for sustainable sourcing.
Speaker 3:So we've been working really closely with ASR since 2017.
Speaker 3:Where they've actually come to Queensland, they use a platform called ProTerra and we've taken their representative out there, Rafael Avella, onto farm and he, with some independent auditors from ProTerra, have gone on to Sugarcane Farms who have SmartCamp BNP accredited and gone through the ProTerra sustainability process.
Speaker 3:We've seen tremendous alignment between those two frameworks and he's also done the same process in the mills, which then gives ASR confidence that the sugar cane and the sugar that's coming from Queensland meets their sustainability criteria. The benefit about that is ASR also supports SmartCamp BNP because they see the value of that on farm meeting their sustainability criteria, which gives us that market access into that US market, which is a very important market for us, a good premium market, and if the US say we need sustainably sourced sugar, which is obviously their policy, the Queensland industry can say, yes, we have that, we can tick that. So if there becomes more sugar available for ASR to purchase under the free trade agreement because they can't source it from elsewhere, from those other countries. Australia, hopefully, is the first in line to tick that box. The SmartCamp BNP is a good enabler to do that.
Speaker 1:So could you see a situation that might develop in the future where the end users, the confectionery companies, where they are demanding right now, 100% sustainable sugar? Could that mean that in the future some of the US quota you know suppliers who are not sustainable may not be able to, you know supply sugar to the US?
Speaker 3:Yeah, that's definitely a reality. I see that if people can't meet that criteria like other countries who are providing sugar to the US or other regions who are sourcing sugar can't meet their criteria and Queensland can, and BNP can demonstrate that that gives us an enormous opportunity to get more access into those markets, and particularly those premium markets, and more value back to the growers. And I think that's where the benefit of BNP is on farm and that's why I think the almost 800 growers who are accredited in the program you know, can put their heads up high and say, hey, we've helped support this market access into these industries over the last 10 years.
Speaker 1:So I know one of the pieces of the Smart Cane program is it's sort of born out of. You know environmental, you know reef water runoff was the main driver, but we're now seeing obviously you know reef. You know water runoff was the main driver, but we're now seeing, obviously you know new requirements coming through from both regulatory requirements and you know the end users are requiring certain pieces as well because of regulatory for their own modern slavery and others. So maybe, lindsay, you know you're sort of obviously coming from a couple of different industries. Sugar are you seeing the same requirements across the board or is sugar a bit different than what we're seeing elsewhere?
Speaker 2:No, I think that most agricultural industries are probably finding that their requirements of sustainability are coming or they're here in many cases. That here, in many cases, um, as of the 1st of january 2025, um, there is more regulation, uh, and sustainability reporting required for larger businesses. That's sort of with a billion in turnover and 500 million in assets, but that over the next few years is going to gradually be a net that captures a lot more businesses and I think by 2027 we're into the 50 million dollars turnover. So that's going to capture quite a lot of businesses in sugar, um and across australia. So the main requirements for those have been up to this point, the modern slavery, as you've said, and emissions, and so, um, smart cane is beginning to is working with a new module, module four, which will hopefully incorporate those metrics.
Speaker 1:If you sort of step back and you look at the Queensland sugar industry these days, we have some very big companies here. So we have the likes of Coffco, we have Wilmar, we have Nord Zucker, we have Mittpol as sort of big milling companies. So obviously these companies, you know multinationals. They're going to be hitting these thresholds and they would have their own requirements, I'd imagine as well. And you look at some companies like Wilmar, they have multiple product lines, not just sugar.
Speaker 1:So I think that's one of the things we're seeing is that these companies are developing their own sustainability programs to be able to monitor and manage their reporting and also their requirements with their supply chains, aren't they? So it's an interesting development and I think, from what I understand, is that that's going to be probably our challenge for SmartCane BNP is how do we integrate the sugarcane assurance program that we've been working on with SmartCane BNP and linking it to some of these other programs that our multinational partners might have, or other programs like Proterra or Vive, et cetera? So that seems to be going to be a new focus for us in the next little while, I'd imagine.
Speaker 2:Yeah, I think one of the important things to remember about Smart Cane BNP is it was born out of an interest in best practice and social license and that has been an industry-led and a grower-led initiative. And so the modules that form Smart Cane are really about best farming practice, including the core modules are really around practices on farm for soil and nutrients and weed and pest and irrigation and water use and as we move into module four that will capture emissions and modern slavery, which will tick all the boxes, as matt has said, for sustainable sugar sourcing, um, but there are also plenty of other on-farm uh pressures that are coming down the line. We've had um government regulation around nutrient management for the great barrier, reef protection, and smart cane is recognized by the government as an industry leader in terms of our own management of nutrient. So I think that smart cane it meets a lot of different requirements. It meets the sort of profitability and productivity on farm, it meets reef requirements and it will meet sustainable sugar sourcing.
Speaker 2:So when it comes to many of the other sustainability frameworks which you know, smart Can is a voluntary scheme. There's other options that people want, but it makes sense to have it as an on-farm accredited program. It's third-party audited and that we can work in with Proterra. We can work in with VIVE. We've recently incorporated some of the VIVE standard into Module 4, so it's recognised and so that post-Farmgate into the mill and beyond can be accredited in any way.
Speaker 3:And that's where the trust comes from.
Speaker 3:Effectively, that independent third-party accreditation of BNP provides that trust.
Speaker 3:Yeah, so the buyers of sugar along the whole supply chain can have confidence that they know well, bnp has an independent third-party assurance and what we're saying, we're doing, can be backed up.
Speaker 3:And I think that's a really important point to make, because that's that's really for me, uh was a really driving criteria when we first developed smart cam bmp 10 years ago or longer than that has been rolled out for 10 years but when in its development, we wanted to make sure there was a strong assurance and a certification component of it so no one could then say, oh, it doesn't have enough teeth. And so I think that's really important. And the other point I want to make is we can't work in isolation in terms of supply chain. So you know, I think these criteria coming back to the big users of sugar, like our milling companies and our marketers, they also rely on the whole supply chain to provide that data, because it flows right through the supply chain back to the grower as well and so that would be one of the reasons why smart cane is seen to be a leading uh program by the likes of coca-cola is because it provides that assurance.
Speaker 1:Is that right?
Speaker 3:yeah, absolutely, absolutely. So. The feedback I've had in the in the time frame we've been working on this is that the assurance is a really important component to a lot of buyers of sugar because they can then, you know, feel confident that the growers are doing the right thing and they've had that independent check off, and so when we think about that recertification activity, which I know some of the the uh, the uh, the smart cane certified farms are now approaching that five-year period, so that's obviously a very important part of it too, I'd imagine, is making sure we maintain that assurance.
Speaker 1:So it's not just a one-off activity, it's an ongoing activity and we do need to show that we are ongoing with sustainable production.
Speaker 2:Yeah, so Smart Cane is 10 years old this year and that means that some growers are coming up to not only their first reaccreditation but their second and the program has a very impressive 95% retention rate of growers in the program. So growers are finding value in maintaining that accreditation and maintaining those records and having that independent third party auditor.
Speaker 1:So a lot of these big companies that we work with here in Australia, but also the milling companies, who are obviously the customers of the cane, they have to do a lot of reporting these days, too, don't they? So maybe just explain, because these regulatory requirements are here and present, aren't they? So this is something which has been talked about for a while, but now there is a very strong requirement in terms of scope three reporting, in terms of scope three reporting, and maybe just explain what that means and what it means for how companies manage some of these assurance activities.
Speaker 3:Yeah, scope three reporting. So a lot of companies are making claims or targets about being carbon neutral or reducing their impact on climate by 2030, 2040, 2050 depends on their internal targets they have. But that also means that while they can do their own work in their own business to reduce their greenhouse gas emissions and energy use and things in their own business, they don't have direct influence on their suppliers or the supply chain. So scope three emissions is about how you manage the energy use outside of their own control.
Speaker 1:So growers- so growers effectively yes.
Speaker 3:So effectively. A Coca-Cola might say well, we're sourcing sugar and we use this much energy, but in the supply chain there's a lot more energy used to generate that sugar. We don't generate it, but we need to account for it, and so that comes back to the grower in some respects right back to the supply chain in terms of how he's grown his cane, the fertiliser he's used, the fuel he's used and things like that.
Speaker 3:So that gets accounted for and the challenge around that is how you report that and how you report that back up into a system and provide that information back to the person who's asking for it.
Speaker 3:And that's data and that data has value. But also there's a requirement now coming through that there's a need to report this back through the supply chain. So there's ways to do that and I know Lindsay and Mick and the BNP team have been working pretty hard in Module 4 to support that through a greenhouse gas calculator, and I think that's their opportunity to demonstrate how we can do that, which in some ways gives us more opportunities for market access because we're meeting some of these criteria and hopefully that also leverages more premium markets. But maybe there's a bit of value that can come through from that.
Speaker 1:So just so I got this clear. So basically the big companies like the Wilmars and the COFCOs they've obviously got turnover, which means they have to do this reporting anyway. So it's coming. They have to do this reporting. Their banking partners are probably requiring them to do that. So there's regulatory requirements coming. So a program like BMP can actually provide that data or they're going to have to find other ways to get the data. Is that what these guys will have to do?
Speaker 3:Yeah, essentially so. The Australian Sustainability Reporting Standards ASR 1 and 2, ask large listed and unlisted entities to start providing this data as of 1st of June 2025. So, as Lindsay said earlier, companies over a billion dollars need to report this back to the government and stakeholders and their shareholders. But that's going to flow down the chain right back to the ground. So that's where the greenhouse gas calculator can come into play in Module 4. And I think Lindsay would have a bit more insight on how that might work.
Speaker 2:Yeah, so the greenhouse gas calculator at the moment is the one that the AIA are using, but there have been a few tweaks needed for sugar because it's not an annual crop and just making sure that we've got all of the right calculations in the background, and that will mean that growers can just put in their figures and work out their own emissions. And module four will be rolled out before the end of the year. In the next couple of weeks or in the next, let's say, month or so, there should be a self-assessment available on the Smart Cane website, and perhaps it is worth noting that data is very confidential in the SmartCane BMP program. So it's not that we collect growers' data and just give that out to everybody, but it is a process and we work with these third-party auditors but also work with the likes of Vive and Proterra to have a proper formal agreement of governance of that data so that that's still protected.
Speaker 1:Okay. So there's going to be some regulatory requirements happening anyway. But bringing it back to the value of sustainable sugar, so I think we've said there's already a value out there. So we're seeing that through the shared pool and through access to the US quota. But I think one of the questions which I know we're trying to work through with the marketers at the moment so we are Smart Cane, is talking to the marketers is that assurance right? So I think we know that the Smart Cane program has a very good assurance around sustainable cane, but how do we connect that through to the sugar and go into the refinery? But how do we connect that through to the sugar and go into the refinery? So I think one of the things to share to the audience is that there is today, in contracts for refined sugar with the end users, a requirement for sustainable refined sugar. So that's already happening, so tick.
Speaker 1:We know that the refined sugar supply to the big multinationals includes a clause or a contractual requirement for sustainable refined sugar. And we know, then, that some of the raw sugar that they're buying going into the refineries also must be sustainable and, as we mentioned before, it's not 100% right now. So most refineries don't have 100% of their sugar coming in, which is sustainable, except for, probably, places like the USA but so that means that they are buying a portion of their raw sugar today, which is sustainable. So that means that they are buying a portion of their raw sugar today which is sustainable, and so that currently, you know, there's different assurance processes for that raw sugar. As Matt was mentioning, you've got Proterra, you've got Bonsucro, you've got Vive and I think you know a bunch of these larger companies like Wilmar and Nord Zucker and others are developing their own programs. So I think the challenge is going to be how do we marry up Smart Cane BMP into those other programs and then also how do we provide the governance?
Speaker 1:So when you guys produce your sustainable cane, how does that flow into your GEI sugar and then how does the GEI sugar flow into the marketer's sugar which they then sell as sustainable sugar? So that's the piece where I think there's still a little bit of work to be done, but I think the marketers are engaging in this process and they're also keen to try and solve this because they're hearing from the market that you know this is a requirement coming through. So I think there is motivation coming from the marketers to do this. So, matt, you know, I think obviously this links to the shared pool, I think, and how it flows through. But yeah, that governance process, it's been solved in other places before, I think, so it shouldn't be too big an issue for us to do here?
Speaker 3:I don't think it will be, but I just want to reaffirm that we've been on this journey since what? 2015 and this sort of recognition. So we started with the bonsukra recognition in 2016, uh, and then, and got recognition of bonsukra in 2017 and, in a way, that it was benchmarked against their program back then. Um, and we've been working with coca-cola since 2016 as well, because that's been a requirement. So, um, and I think in we started working with Vive in 2018, with Proterra, and the industry has achieved the benchmarking and alignment with those programs over that period of time. So we wanted to make sure we're strategically placed. So we saw these things coming and so when they did eventually arrive, we're ready to go.
Speaker 3:So I think that was a good thing to do for the organisation sense and obviously, with Coca-Cola you know, the big buyer of sugar, biggest buyer of sugar in the world, I believe yeah, yes. So you know, if they're asking for these things, then that's where the market has to respond to it. So that's part of the reason why we made sure we had a good relationship with Coca-Cola, both the US and the Australian components of that business, just to ensure that we knew what they were asking for and they could have a good awareness of what BNP does. So, when it comes to buying sugar, that supports that and coming back to your share pool, you're the expert there in that sense. But I think that, again, assurance coming back to that piece where we know we can actually meet the criteria probably gives a lot more support to buyers of sugar and hopefully that supports our sugar in the market to access those buyers and customers.
Speaker 1:So I think a couple of things I know we've been hearing Matt is that, a the end users are prepared to pay a premium if they have to to source the sustainable sugar. I think the second part is that means that, theoretically, raw sugar should also be getting a premium for being sustainable as well, which I think we're hearing various forms, whether it's Bonsucro certified sugar getting two bucks a ton or Vive certified raw sugar getting two bucks a ton. So the things they're actually happening. But I think what I think from a grower's perspective, you know they'll be saying well, how come I'm not seeing that? Show me the money, how do I get the money in my pocket?
Speaker 1:And so I think yeah, I think that's probably something just to share back to everyone is that that process is happening and the structures are there to be able to allow for that within the marketer's payments process. So we do see this already within the shared pool, where there's different results for different growers depending on their choices of payment timings or other attributes, and we know that every grower these days can do their own pricing, so they all receive different prices. So there is the capability to do that and the marketers have told us this capability exists to be able to differentiate, because I think there is definitely an understanding that we can't see the certified growers subsidising the non-certified growers for accessing some of these premium markets and receiving the premium. So at the moment obviously there's enough sustainable sugar to get supply and we're not seeing an issue there yet. But I'd imagine potentially in the future we might have a demand that is outstripped by our requirements and that could be where we do start to have to see that differential come through.
Speaker 3:Yeah, well, that's an interesting point because I mean, one of the goals personal goals I've always had is how do I get value back to growers? You know. So, when the sustainable sugar started around 2015 in earnest and you know buyers are asking for it, you know the first question was well, how do I get a premium back to me? You know what's in it for me. How do I get a premium back to me? You know what's in it for me. How do I get more value back to me? Because you're asking me to do more, so how do I get more in my pocket, which is a fair question. And in the sort of the 10 years being involved in that sort of process, you see it come and go, but you don't necessarily see it directly flow back to the grower, unfortunately, but it is there. But I potentially see a time where. Take the US market, for example, the US quota. They want sustainably sourced sugar. So if that's what their requirement is and… it's going to be 100% 100% sustainably sourced sugar.
Speaker 2:So, that technically then the smart can be in big growers to meet that criteria in some ways, or the mills producing their sustainably sourced sugar. If they're BonSucre certified certified can meet that need. But if that sustainably sourced sugar is, required and the US market pays a good premium, as we know, above the world price. Should that value flow back to the grower in terms of the work they've done, because they'd actually be uncredited to meet the requirements of that market as requested by the buyer actually, so you?
Speaker 2:think that value would flow back to the person who's creating that value in the first place. To meet the criteria. It could be controversial, but that's what the market's asking for. So if people are actually in growers and businesses and meeting that criteria, then you think they should benefit from that, and probably in time time that might happen.
Speaker 1:Yeah, I know that's the question I get asked a lot by the growers as well is you know what would happen if I'm not certified? And I think, yeah, what you're describing is the situation that could eventuate. I mean, we don't know this yet, but in a market environment where there is that requirement and we have some sugar which is available out of Queensland which is certified sustainable and some which is not, that means that the non-sustainable sugar might have to go to markets which are obviously lower returns. So there would be potentially a bit of a differential then between certified sugar and non-certified sugar. So that's probably potentially where we might move to over time. But yeah, I think at the moment it's all pooled together and, yeah, the mass balance system means that you know we don't have separate piles of sugar for certified versus non-certified. That's just not the way it can function. So it really is that mass balance percentage approach at the moment, isn't it?
Speaker 3:Yes, mass balance is where it's at in terms of how you measure it, and I believe there's enough sustainable sugar in the market at the moment to provide to the customers who are actually asking for it. Yep, that's right, but I think that's changing, and so us being on the front foot with the SmartGam BNP and alignment to those standards, but also then Module 4, when the new conditions start to flow on through whether it's greenhouse reporting or modern slavery or regenerative agriculture or making sure people are appropriately paid all those sort of things BNP can tick off, and that's where I think the opportunity comes in the future, so growers who are on that journey and part of it may be able to benefit from it more. And I think the carbon and climate's going to drive that much more strongly than it has now from it more, and that maybe I think the carbon and climate is going to drive it much stronger and more strongly than it has now. And as those targets that those customers have set and governments have set get closer, I think the pressure will come on.
Speaker 1:So it sounds like we've done a fantastic job in positioning ourselves to be able to get access to some of these premium markets. We're already seeing value in Japan. We're already seeing value in access in the US market and then when they release additional quotas, we do have, I know, preferential access to those additional quota releases too. So there's already value there. But it sounds like there are expanded requirements coming through, especially in the greenhouse gas and the modern slavery reporting part of things there, lindsay. So that's why I suppose Module 4 is going to be very important to continuing that assurance process and really, I think, making sure we don't see duplication of auditing requirements on farm right, but I think that's probably what we're trying to see Module 4 doing is try to make it a one-stop for assurance for sustainable cane.
Speaker 2:Yeah, absolutely Dougal. I think Smart Cane is a real credit to the growers who've been involved over the years. It is a voluntary, industry-led program and so Module 4 will tie up that loop and it will enable Smart Cane to deliver into sort of Vive and Proterra supply chains and other sustainability frameworks as they come on board. Module four initially will probably be available to growers who are already certified in modules one to three. That will be the first sort of cohort, so that will close the loop for them and they'll be fully certified for sustainable sugar supply chains and then we will look at rolling that out more broadly. So keep tuned.
Speaker 3:Yeah, and I was just going to say Dougal, bringing it back to that the mum in the supermarket aisle looking at that bag of sugar wondering where it comes from. I think you know SmartCan, bnp captures those environmental, social, esg practices. So aligning those things builds trust with consumers, reduces our audit fatigue because we don't have to have more audits, and strengthens our industry credibility. So I think that gives us market access, access to premium markets and I think allows us to get that value and opportunities to get value back to growers. So that's the sweet spot, if you want to put it that way, and it means growers can get on with farming and growing sugarcane and while the supply chain gets on, and with the proof that it needs and BNP is there to support that.
Speaker 2:Yeah, absolutely.
Speaker 1:All right. Well, thank you very much, lindsay and Matt, for joining us today. I think we've had a great conversation about the value of sustainable sugar, hopefully explaining where their value has been achieved already and recognition I think global leading status achieved already, but obviously still more value to come and trying to keep it as efficient as possible because these requirements, both regulatory and market requirements, are here right now. So I know there's been lots of questions. Well, you know when's it coming. Well, it is here now. So great to have a quick chat about that and looking forward to catching up again soon. Thank you very much, guys. Thanks, dougal. Thanks, dougal. Please note that Cane Gross does not have an Australian Financial Services licence, so all the information contained in this presentation is general information only.