Port Douglas & Mossman Gazette - - FRONT PAGE - Shane Ni­chols

AF­TER a stel­lar run last year the world su­gar price is back down to earth – around its long term av­er­age – fol­low­ing a huge sell off by traders and spec­u­la­tors.

This week it had re­cov­ered from large falls last week, and is now trad­ing around $420 a tonne.

For a time it had been closer to $400 a tonne, on a nexus with grow­ers’ cost of pro­duc­tion in many cases.

The sell off, said QSL gen­eral man­ager of trad­ing and risk Dougall Lodge, was driven by Brazil. Cur­rency fac­tors, a po­lit­i­cal scan­dal and move­ment in the petrol price with im­pli­ca­tions for ethanol pro­duc­tion, had trig­gered the sell off.

An­a­lysts now ex­pect a sur­plus of su­gar around the world, prob­a­bly in the or­der of 3-4 mil­lion tonnes.

An over­sup­ply is against the usual pat­tern, said Mr Lodge, in which a two-year deficit is fol­lowed by a four-year sur­plus.

“But un­for­tu­nately what’s hap­pened due to a cy­cle of ra­toon­ing in the cane and a lot of govern­ment in­volve­ment in set­ting cane prices around the world, is that low world mar­ket prices don’t nec­es­sar­ily trans­late to lower pro­duc­tion.

“In other com­modi­ties peo- ple can switch to other crops quite eas­ily within one year but su­gar cane has a longer term cy­cle.

“So if peo­ple make a de­ci­sion to plant more cane based on high world prices, but by the time it’s the first har­vest, or sec­ond or third ra­toons then there’s an abun­dance of sup­ply in the mar­ket.

“That’s where the fu­tures mar­ket can ac­tu­ally take some of that volatil­ity out of the mar­ket.

“We’re lucky in Aus­tralia – we’re the only place where grow­ers can price for­ward their cane for three years. Ev­ery­where else the govern­ment lit­er­ally sets the cane price.”

For one rea­son or an­other, it seems many of Aus­tralia’s su­gar ri­vals have got their cane pro­duc­ing re­ally cranked at the mo­ment. Mon­soons in South-East Asia re boost­ing pro­duc­tion, the EU has some­how man­aged to nearly dou­ble pro­duc­tion com­pared with re­cent years, and Brazil is pro­duc­ing more.

The on­go­ing sell off by spec­u­la­tors has been the equiv­a­lent of the Aus­tralian in­dus­try ex­pand­ing by five times in one year — mas­sive.

Su­gar has been one of the worst per­form­ing com­modi­ties this year so far com­pared with one of the best last year.

Pic­ture: AFP

Cane field on fire in Mex­ico: ac­cess to the US has been cen­tral to trade ne­go­ti­a­tions that threat­ened a trade war

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