Friday, February 4, 2011

Sugar Prices on the Rise

article from the WSJournal

Cyclone Yasi to hit 26 sugar mills, 4 coastal terminals

Sugar cane farms at Bangara, near Bundaberg in Queensland

THE sugar industry in Australia, the world's third-largest exporter, is facing one of its biggest ever disasters in the next 24 hours as Tropical Cyclone Yasi bears down on the prime growing and milling region on the country's northeastern coast.

Yasi will add to the woes of an industry that was battered by poor weather and floods through the key harvesting and crushing period in the latter half of 2010, and it will further affect Queensland, which has only just started to recover from deadly and devastating flooding in southern and central regions over the past month.
At time of publication, Yasi was rated at the highest category-5 level, with winds exceeding 280kph. Yasi is expected to cross the coast between Cairns and Townsville in Queensland around 1300 GMT, after intensifying while travelling westward through the Coral Sea.
“Severe TC Yasi is a large and very powerful tropical cyclone and poses an extremely serious threat to life and property within the warning area,” Australia’s Bureau of Meteorology reported. “This impact is likely to be more life-threatening than any experienced during recent generations.”
Farmer lobby Canegrowers has estimated the cost of Yasi will exceed $500 million, including crop losses and damage to farming infrastructure, which also covers sheds and machinery.
Canegrowers chief executive Steve Greenwood said: “The half-a-billion projected losses don't even start to include the cost of broader damage to infrastructure, such as the road and rail network, houses, property, mills and ports.”
Theoretically, insurance premiums for sugar-cane growers in the region would be so high as to make cover financially impractical.
Some growers stand to lose 100 per cent of their crop, a blow from which they may never recover, he said.
Yasi is projected to cross an area that accounts for least one-third of Australia's sugar cane crop, almost half of the industry's 26 sugar mills and four of the industry-owned coastal export terminals and associated storage and handling infrastructure.
Companies with milling assets in the area include Singapore-based Wilmar International, Bundaberg Sugar - a unit of Belgium's Finasucre - and Maryborough Sugar Factory.
Yasi looks set to track the movements of devastating Cyclone Larry, which five years ago wiped out 40-50 per cent of crops in its direct path, he said.
Neil Taylor, chief executive of marketing concern Queensland Sugar, which operates the export terminals, said the company has developed contingency plans “for this once-in-a-generation event. Our focus is on not letting international customers down”.
He wouldn't comment on specific activities.
While sugar cane is a resilient plant and is traditionally capable of withstanding some tropical storms, Yasi is likely to result in losses due to its severity and because of the significant proportion of cane left standing in fields after last year's harvest, Luke Mathews, the farm commodity strategist at Commonwealth Bank of Australia said yesterday.
Some 20 per cent of the cane crop was left standing last year, unable to be cut before the harvest ended ahead of Christmas, resulting in a 20 per cent decline in raw sugar production to around 3.6m tons in this financial year ending June 30, and a corresponding decline in export availability.
The cost of the weather-related damage to the sugar industry in 2010 was estimated at $470m by Abares in December.