GLOBAL sugar stocks, already buoyant from last year’s bumper Asian harvest, are poised to remain brimming as this year’s sugar scoop shows signs of another boom year.
Rabobank Commodity Analyst Georgia Twomey said the outlook was far from sweet when viewed from the perspective of the producer with the likelihood of a global surplus dragging down export commodity prices.
Ms Twomey said an increase of four million tonnes out of Thailand - up from its five year average of 10.5mt plus India’s increase of 5mt on its 26mt average will swamp any reduction in Brazilian production, where dry weather this season could reduce that country’s harvest by 4 to 5mt.
Over half of Brazil’s 30mt of sugar is used to produce ethanol which fuels many of the country’s cars and even the president’s aeroplane.
Brazilian ability to switch end use for sugar cane is a good one for takers of world commodity price, as their contribution mostly evaporates as fuel, not food.
The US produces upward of 8mt raw value but is not a major player in the world market - gobbling up all its own sugar plus some more, including a little lucrative quota for Australia.
Despite a small upward move this week in ICE sugar prices, most analysts expect large global sugar stocks as a result of Asian harvests to keep pressure downward on export sugar prices.
Meanwhile, the Australian domestic sugar industry is a drop in the ocean compared to truly giant producers elsewhere, contributing just 4.5mt to the global sugar production, of which less than 250,000 tonnes comes from the three northern rivers of NSW.
As a result local growers were always going to be dragged along by world price - unless they sell to a different market.
Bundaberg Sugar, ultimately owned by Belgium-based Finnasucre, is introducing organically grown sugar to its domestic customer, building on a brand that already follows Bonsucro best practice standards.
Sunshine Sugar Milling co-operative on the Northern Rivers, another subscriber to the Bonsucro standard, has already announced that it will aggressively pursue alternate end uses for its sugar, in particular low glycemic index product for both manufacturing and retail end uses.
Sunshine Sugar chief executive officer Chris Connors said the new variety of sugar in its first year of production at the Condong mill could be rolled out across all three mills in the Northern Rivers with the real potential of providing a 10 per cent lift in sugar prices going back to the farmer.
For this year the co-operative hedged its bets, forward selling its crop well above export parity at $430 to $440 a tonne and will be able to return $31 to $32/t for cane back to the grower.
Anticipation of poorer global prices 18 months ago prompted Sunshine Sugar to sell ahead and had they not done so New South Wales’ growers would be looking at prices for their cane around $25/t which below cost of production.
NSW cane cutting season will begin a week earlier than usual to keep sugar stocks flowing out of the Harwood refinery with the first fires scheduled to be lit early next week.
