Australia could see its smallest sugar crop in 20 years as a result of recent heavy rains.
Rain has interrupted the Queensland harvest, forcing Queensland Sugar Limited (QSL) to downgrade its export forecasts.
QSL has cut its initial export estimate of 2.9 to 3.0 million metric tonnes, to closer to 2.6 million metric tonnes.
The news came a day after world sugar prices hit a series of new near 30 year highs around the world.
Prices reached above 33 USc a pound in New York, the highest since 1981 and the latest in a series of 29 year highs in the past month. The price eased a touch Wednesday night, our time to 32.81 USc a pound.
Part of that has been due to the second round of easing by the US Federal Reserve which has boosted commodity prices by cutting the value of the US dollar.
But the main driver for the rebound in prices after they slumped earlier in the year has been weak crop prospects in Brazil and Thailand, uncertainty about India’s crop, the wet weather in Australia and lower US production (to go with forecasts of lower wheat, corn and soybean crops as well in 2011).
World sugar price have in fact risen faster than the value of the Australian dollar in recent months.
Sugar prices have more than doubled from June (and are up 23% from the start of January). The Australian dollar is up by more than 22%, so growers and processors are getting a big surge in returns.
QSL chief executive Neil Taylor said in a statement the recent heavy rain in many parts of the Queensland coast had interrupted the harvest and was severely impacting yields.
He said the total Australian crop may be less than four million tonnes – which would make it the smallest sugar crop in almost 20 years.
"Queensland is experiencing one of its wettest spring periods on record, with key sugar-growing regions receiving between 200 and 400 per cent of their average rainfall," Mr Taylor said in a statement.
"The Australian sugar crush is usually drawing to a close at this time, but due to the extreme rainfall this season it is only around 75 per cent complete.
"As a result of the seasonal conditions, Australian sugar exports could fall by 15 to 20 per cent compared to last season."
QSL is responsible for more than 90% of Australian sugar exports.
But he said that at this stage, there was no danger of current contracts not being met.
He said there was some positive news, with very strong prices available for next season.
"Forward prices for next season are approaching A$550 per metric tonne, and we see the seasonal pool for next season opening at around these levels.
"If the current crop issues around the world remain negative then there could be further upside from here."
Tuesday’s rise was the 10th daily rise in a row for Sugar in New York and London.
Estimates of Indian exports have again been cut, this time to 1.5 to 2 million tonnes, down from the earlier estimate from private forecasts of up to 3.5 million tonnes. Bad flooding in the state of Uttar Pradesh has cut forecasts.
The United States Department of Agriculture put US output at 8.23 million short tonnes in the year that began October 1, down 1.8% with lower harvests expected for Louisiana sugarcane and sugar bee.
The Agency put US imports from October 1 at 2.74 million tonnes, up 21% which would normally be good news for producers like Australia, but could put even further upward pressure on prices.
And Singapore-based Wilmar International, which has been cleared to buy CSR’s Queensland sugar business, has reported a 60% slump in third quarter earnings.
Wilmar is the world’s biggest palm oil trader and it blamed lower profit margins in the oilseeds and grains unit.
Palm oil is being hoarded by Chinese consumers worried about price rises. The commodity is in increasing short supply as well.
Net income fell to $US259.5 million, despite a 23% jump in sales to $US7.8 billion, while the cost of sales climbed 31.5% to $US7.3 billion.
In the previous three-month period, profit fell 15% as refining margins shrank and production yields from its plantations dropped.
The oilseeds and grains unit had a pre-tax loss of $US37.1 million because of “weaker margins and less-timely purchases of raw materials” Wilmar said. A $US167 million gain for the group in the 2009 third quarter wasn’t repeated.
CSR said last week that first half sugar earnings dropped to $A66.7 million from $A114.2 million as rain delayed cane crushing.
