Wet conditions might impact Australia's sugar outlook 2011

It's been a volatile year for Australia's sugar industry but the long-term outlook is sweet, Queensland Sugar Ltd's annual general meeting has been told.

World sugar prices have swung between 13 and 33 cents per pound (c/lb) during the year, and heavy rains have disrupted the 2010 harvest and crush in Queensland.

"Australia will export quite a bit less sugar than it has in recent years," QSL chairman Alan Winney said.
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"(Exports) could be as low as 2.5 million tonnes this year. The last few years have been around 3 million tonnes."

He said the wet conditions could impact on the 2011 harvest as well.

However, the future looks brighter, with limited international capacity to increase production and rising demand, particularly in Asia, underpinning prices.

Mr Winney said prices should stay above 20c/lb over the next four to five years and could spike to more than 30c to 40c/lb.

The volatility of the market has again been demonstrated in the past week, with raw sugar prices varying between 33c/lb and below 28c/lb.

"We're currently estimating prices above $400 a tonne for sugar over the next three to five years in Australia," he said.

"That is a healthy return for Australian canegrowers and makes the mills profitable."

Mr Winney said the positive price outlook would hopefully encourage increased sugar plantings, reversing the trend of falling production over the past five years.

QSL works on behalf of Australian sugar millers and growers, doing business with sugar refiners in the Asia-Pacific region. It is responsible for more than 90 per cent of Australian sugar exports.

QSL reported a Seasonal Pool return of $508.77 per tonne and total pool revenues of $1.69 billion for 2009/10.

Its net surplus increased by $4.6 million to $6.3 million.

QSL announced at the AGM that it had acquired additional shares in North Queensland sugar miller, Tully Sugar Limited, increasing its strategic stake in the business to approximately 14 per cent.

QSL also advised that the company was continuing to purchase on the market G class shares in Sugar Terminals Limited (STL), lifting its stake to approximately 10.5 per cent.

QSL and STL were separated by the Queensland government a decade ago upon the break-up of the Queensland Sugar Corporation, but the two would be better off as one entity, Mr Winney said.

"We think it would be more efficient if we just ran it at low cost for the industry and provide the services need through the shipping terminals," he said.

"We will continue to look at ways whereby we can bring these two organisations closer together, including continuing to buy shares from willing sellers," said Mr Winney.

The AGM was told QSL was developing a pre-crop finance package to alleviate the cost of planting cane to bring some short-term liquidity to the industry.

Mr Winney said QSL expects further consolidation of milling assets in an atmosphere of an upwards revaluation of the Australian sugar industry.

"There may only be two or three milling groups still operating in Australia inside a five-year period," he said.

source: news.smh.com.au