Uncertainty hits sugar industry

Story Added : 06th May 2011

The record highs were the result of production losses in Australia and inconsistent Indian sugar production plus downgrades to the expected 2010/11 global sugar supply surplus were also to blame.

While sugar seems to have the weakest near-term prospects across the agricultural sector, Queensland Sugar (QSL) have announced an initial advance delivery of $265/t for raw sugar in the 2011 season – the same as 2010.

Despite the company’s strong initial advance rate, the future of the Australia’s sugar industry remains uncertain as severe weather conditions continue to challenge Queensland growers.

QSL's managing director and chief executive officer, Neil Taylor, said the key Queensland cane growing regions were continuing to experience heavy rain, which will lead to significantly lower volumes for the 2011 season.

“This may pose some further downside risk to crop volumes for 2011, and we will be working closely with industry to understand what implications, if any, the most recent bout of poor weather will have on crop forecasts,” he said.

Improvements in supply has been the primary driver of the price downturn, particularly with a larger than anticipated crop in Thailand, which is estimated at 10 million tonnes this year.

“We have experienced some softening of prices already due to an unexpected record Thai crop, and we may experience further softening later in the year when the anticipated bumper crop from centre-south Brazil come onto the market,” Mr Taylor said.

“The strength of the dollar is also playing a role in terms of impacting the market and level of returns achieved, and we are monitoring currency movements closely.”

Remaining optimistic, Mr Taylor said that while there were significant fluctuations in price day-to-day, the global supply and demand picture remained broadly constructive, helping to underpin global prices for raw sugar.

“The market is continuing to deliver solid prices and the price outlook at this stage remains fairly positive for the rest of the calendar year,” he said.

The Australian crush is set to begin in May, with Australian production expected to be constrained to 3.2 million tonnes.