Management of environmental externalities of agricultural production has become a necessity to attain sustainable resource use and efficient use of resources. In this paper we identify sources of externalities in Australian sugar cane production and examine ways to enhance greater environmental compliance by canegrowers who have agreed to a voluntary Code of Practice for sustainable cane production. The rationale for developing bestpractice management options to mitigate environmental consequences of cane farming is explored using land management options for cane production in acid sulfate sensitive soils in the northern NSW coastal region as an example. This will form the basis for a detailed investigation of catchment-wide management strategies to mitigate the risks associated with farming on acid sulphate soils.