Transaction costs in the sugar industry - actual and potential

This paper explores the economic ramifications of the contractual relationship between sugarcane growers and sugar millers, the administered nature of which is a key feature of the Queensland sugar industry. This relationship is based on collective arrangements where, in the majority of cases, the mill owner has the position of a single buyer monopsonist dealing with the growers who act collectively to constitute a monopoly single seller. It is argued that in these circumstances, the economic case against industry regulation is overstated. Deregulation of this contractual arrangement has the potential to lead to increased industry costs, and a reduction in the Queensland sugar industry's comparative and competitive advantage as one of the world's largest sugar exporters.