Tag Archives: australian sugar

Australian raw sugar exports to recover in 2012

Australian raw sugar exports are likely to be closer to 2 million tonnes in the 2011/12 season rather than the usual 3 million tonnes.  Exports are unlikely to recover and revert to the 3 million level until the 2012/13 season.  Cyclone Yasi hit Queensland and damaged its sugar cane crop in early February.  Queensland produces 90% of Australia’s sugar.

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Damaged sugar cane from cyclone Yasi to fuel mills in Queensland

In a bid to salvage something from recent damage to sugar cane crops in Queensland caused by cyclone Yasi in early February the remains have been turned into a renewable resource to fuel the boilers of sugar mills.  The woodchip will be used to generate steam for the boilers.

Will ethanol save Australia’s ailing sugar industry?

Australian MPs are seeking to change legislation that restricts ethanol use in petrol to 10% in a move to revive and save Australia’s ailing sugar industry.

Seven sugar mills have closed in Queensland over the past decade leaving only 22 remaining mills.  A further mill in Cairns, Queensland recently announced that it will be closing.  The sector employs over 45,000 people in Australia. 

A campaign for wider ethanol use is proposed and the Australian Workers Union has been asked to actively promote and support the campaign.

La Nina eyes Australia’s sugar crop

Following cyclone Yasi and its damage to a quarter of Australia’s sugar cane crop there is a chance that the La Nina weather pattern may reform and strengthen during the southern autumn season.  However, the expectation is that La Nina will weaken.

An era of high sugar price volatility?

High volatility has been a feature of futures and physical sugar markets over the past months.  Whether high volatility is likely to become a long-term feature of the sugar market or whether traded options on sugar futures will become liquid and a viable means of trading such volatility or whether governments, regulators and exchanges are likely to put in place measures to stem price swings is yet to be seen.  However, there are a number of factors that if not addressed give rise to the possibility of higher price volatility over the long-term.

Global warming and as a consequence climate change raise the risk of weather instability in the form of extreme weather and an increase in magnitude and frequency of such events.  In early February cyclone Yasi destroyed up to 25% of Australia’s sugar cane crop.  Supply tightness as a result of such weather events, increasing world population and rising demand for ethanol leading to sugar cane, particularly in Brazil, being diverted to ethanol production potentially provides sugar with price support.  Rising oil prices make biofuels, including ethanol from sugar cane, viable and more competitive, but higher biofuels demand potentially decreases sugar supply and removes agricultural land from food production to the growing of crops for biofuel production.  Rising food prices have led and will continue to lead to political instability around the world, in some cases pushing oil prices even higher.  Such political instability raises concerns amongst governments and often results in decisions aimed at protecting domestic food stocks, including sugar supplies, at the expense of potential exports.  India recently referred a decision to permit up to 500,000 tonnes of sugar exports, under its Open General Licence, to a government panel for review and ratification to ensure sufficient domestic supplies prior to such an approval.

Due to the serious nature of the above issues and the potential for market and political instability, futures exchanges have moved to play their part in reducing price spikes and volatility resulting from computerised algorithmic trading.  ICE announced in February that it may revert back to automated price generation.

ICE automated price generation

Regulators are also exploring measures that can be put in place to ensure price transparency including clearer supply and demand outlooks, open access to futures trade data including large positions held by funds and reporting and/or placing OTC trades through the exchanges.  As there seems to be no consensus on the link between derivatives speculation and physical commodity prices, limits on futures positions seems unlikely.

Nicolas Sarkozy has identified commodity price volatility as a priority during France’s presidency of the G20 group of nations. US beet production may decrease by 20% and in a move to avoid this, last week the USDA gave Monsanto the go ahead with its genetically modified sugar beets.

Monsanto sugar beets get green light

India may hold the key to world supply

With Brazil unlikely to ease sugar market supply concerns in the short term and its rising demand for ethanol India’s sugar exports under Open general Licence (OGL) may hold the key to market supply and consequently an easing in sugar prices which currently stand at near 30 year highs.

With up to 25% of Australia’s sugar crop lost to cyclone Yasi and tight global supply, India may be pivotal to the market establishing whether the decision recently announced by India approving 500,000 tonnes of sugar exports under its sugar OGL is to be ratified.  The decision has been referred by a government keen to ensure that sufficient supply exists for domestic consumption before permitting such exports to proceed.  A review of the decision and its possible ratification are yet to take place.

China rate rise results in sugar sell off

China’s interest rate rise to curb inflation has led to concerns over a slowing in the Chinese economy and decreased domestic demand. Raw sugar was down by over 4.5% to 31 cents per lb.

F.O. Licht sees global sugar output at 165.1 million tonnes down from its earlier forecasts of 166.4 million tonnes. Weather predictions for Australia seem to indicate further cyclone activity over the next two months. An issue that is providing sugar prices with support in the short-term.