World sugar prices have plummeted to 12c per pound – well below production cost.
World sugar prices have plummeted to 12c per pound – well below production cost.

Clarence canegrowers face bitter outlook

CLARENCE Valley cane growers have one eye firmly set on the international sugar market as prices plunge around the globe sending local growers into a panic.

With world sugar prices plummeting to 12c per pound - well below production cost - chairman of CANEGROWERS Australia Paul Schembri has expressed the concern of all in the industry.

"I can say that it is very, very concerning to everybody in the industry, particularly given that Australia is 100% exposed to the world sugar price," he said.

"Our sugar price is tied to the world price, so if you have a world price that is falling it obviously is worrying everybody in the industry.

According to Mr Schembri the devaluation of world sugar has come as a result of a perfect storm of factors coming together to plummet the price of sugar.

"There are a few factors that separate were manageable but when put together they create a 'not so perfect' storm for Australian producers," Mr Schembri said. "The principal problem is that Brazil, who is a major producer of cane, has gone through a devaluation of its currency.

"This has resulted in them pumping more cane into the production channel. The market is interpreting that as more sugar coming into the world market thus devaluing the price.

"Then we have the Indian government which has managed to pump a surplus of sugar that they held into the global market.

"And finally there has basically been a global surplus overhanging the market for the past five years already. So putting all those factors together in the one hit is seeing the global sugar price plummeting to an eight year low."

The Australian sugar industry does have some offsetting factors that keep it above water.

"We are partially sheltered by forward pricing, some mills would have taken price positions two or three years ago," Mr Schembri said. "The other off-setting factor is the Australian dollar has fallen to six-year lows. It means with a lower Australian to US exchange rate we get more for our sugar.

"But it is truthful to say if this low price environment continues it will be fed into our pricing systems.

"It could become extremely destructive."

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