Tag Archives: cyclone Yasi

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.


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.

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.

Brazilian sugar cane to be diverted to ethanol production

Ethanol demand in Brazil may see sugar cane diverted to ethanol production rather than sugar thereby dashing hopes of the possibility of higher sugar production to ease supply.  It is expected that some growers may increase the size of their crops to take advantage of higher sugar prices which in turn may see prices fall later in the year as supply concerns ease.

Despite a larger sugar cane crop expected in 2011/12 sugar production is unlikely to be significantly increased or changed due to the diversion of cane to ethanol production. Rising domestic ethanol demand in Brazil is likely to continue into next year.

Brazil’s sugar production figures, rising domestic Brazilian ethanol demand, India’s OGL sugar exports now looking unlikely, EU out of quota imports and the impacts of cyclone Yasi on Australian production may provide sugar prices with support as concerns grow concerning supply tightness.

Upward trend driven by physical buyers

Australia is now thought to have lost 10% of its 2011/12 sugar production as a result of cyclone Yasi. This amounts to 380,000 tonnes and takes Australia slightly below its 2010/11 production.

News from Australia and India concerning a revised outlook for production and doubts concerning its OGL sugar exports have given sugar prices support. There may be a bullish trend in the short term. The drop away from recent peaks has allowed physical buyers to step in.

White sugar futures rose by 1% to close just shy of $800.

Raw sugar futures in 10% drop

Profit taking following the rallies of the past few days and price spikes has resulted in raw sugar futures dropping by almost 10% closing at 32.04 cents per lb.  Near month white sugar futures were also down by $30 to close at $814.20 per tonne.

The overall sentiment beyond the spring, subject to no significant supply/weather changes, is bearish. An improved outlook for Brazil’s center south which may be forecast to crush more cane than forecast is adding downward sentiment concerning prices.  The improved outlook for the centre south due to recent rains after poor weather earlier and the possibility of improved supply forecasts elsewhere, such as under India’s OGL, raises the prospect of offsetting any negative impacts and losses resulting from cyclone Yasi.

Australian cane damage at over 1.5 million tonnes

Early indications are that cyclone Yasi has damaged between 5% to 15% of Australia’s crop. Meaning that approximately between 1.5 to 5 million tonnes of cane may be affected.  Queensland Cane Growers Association stated that up to 50% of Queensland’s crop may have been damaged.  It remains to be seen how much cane has been only damaged and how much has been destroyed with no possibility of recovery.  Depending on the cane lost we could still be looking at sugar production not far off 2010 figures. Namely 3.6 million tonnes.

However, Some farmers have lost their entire crop and others may have the harvest of future years impacted negatively depending on whether uprooting of the crop has taken place, which may be unlikely.  It is too early for a complete analysis.

Sugar futures fell slightly today when markets opened.  This was more likely a correction from yesterday’s price spikes rather than relief concerning Yasi or supply issues. Nevertheless, despite Yasi, India’s export position and other potential supply risks sugar futures may face resistance on the up side, at least in the second quarter of 2011 as growers move to plant more  cane to benefit from increased prices.