Kevin borg discusses the unexpected upturn in world sugar prices
AN UNEXPECTED rise in the world sugar price in recent weeks into the 14US c/lb range and reaching 14.24c US/lb (or $444 AUD per tonne IPS – International Pol Scale – sugar) has provided much-needed relief to Australian cane growers.
The sugar market is volatile, but at no stage did we see any commentary giving an indication of this welcome rally in the price.
Published figures of around 10-15 million tonnes of surplus world stocks were not conducive to a stronger price.
It goes to show that even while we struggle to operate in doom and gloom situations, prices can recover quickly when reacting to world conditions and the talk that the world surplus could very rapidly turn into a deficit.
This occurrence provides a welcome break after witnessing prices drop to below $320 AUD IPS sugar earlier this year. This meant growers were refraining from pricing their future crops, and they were struggling on farm operating at well below the cost of production with high input costs.
Today’s prices (at the time of writing earlier in the week), although not brilliant, are prices that growers can take
❝subsidises India its growers to the tune of around $150 a tonne.
advantage of and be comfortable that they are at least covering the cost of production.
It seems this price rise has been speculator driven with news coming out of the EU that dry weather is playing havoc with its harvest, causing a reduced crop and creating difficulty lifting the beet crop out of the ground.
This difficulty during the harvest could also lead to further losses being sustained to the EU’s sugar make.
Russia is in a similar position, making these two countries possible net importers.
Brazil’s ethanol parity with sugar is sitting around the 14.5c US/lb mark, causing it to further invest in the production of ethanol.
Brazil is also facing difficulty with its harvest with wet conditions continuing to adversely impact the sugar content of their crop while also causing difficulties with their harvest because of wet field conditions.
India continues to do well in its production and it is looking at exporting around three million tonnes.
This result is from the country’s own subsidies, encouraging further production in an already oversupplied world market.
Canegrowers, along with other stakeholders in the
VOLATILE MARKET: A rise in the world sugar price has given Australian cane growers some relief and goes to show the prices can recover quickly. PHOTO: FILEAustralian sugar industry, continue to lobby our own government to join with other sugar-producing countries to have India investigated by the World Trade Organisation and to halt the dumping of subsidised sugar on the world market.India subsidises its growers to the tune of around $150 a tonne. This encourages overproduction, causing the depressed prices we have recently witnessed.