Good Sugar Price Sweetens The Deal For Us All By Kevin Borg, Chairman, CANEGROWERS Mackay

It might seem like the price of sugar is a matter for the growers and the millers, but every one dollar spent in cane multiplies to contribute $6.40 across the region. The industry supports over 5,000 local jobs and 1,700 Mackay region businesses.

There are quite a few factors at play in determining the price for sugar, including Reserve Bank rates and movements of other countries producing sugar.

The price of raw sugar has seen a drop from the recent record-breaking highs of $600 AUD/mt to around $551.

Shifts in India and Brazil have both contributed to this. Brazil is one of the world’s major producers of ethanol, derived from sugarcane. It’s second only to the US, and produced 35 billion litres in 2019. Ethanol production has had strong support from the Brazilian government, and a guaranteed buyer in state-owned Petrobras.

While that is still the case, there has been an upswing in the percentage of cane going to sugar production with higher sugar prices and slightly reduced world demand for ethanol. For the first half of July, 47.1 per cent of cane harvested went to sugar production.

Meanwhile, India is raising its sugar export quota, with an additional 1.2 million tonnes of extra sugar heading to export. Fortunately, CANEGROWERS and Australian Sugar Milling Council (ASMC) success at the World Trade Organisation means that this sugar is no longer subsidised by the state. The move means that India’s exports will now be above 11 million tonnes.

Brazil, followed by India, are the two highest sugar-producing nations globally, and so exert a huge influence on sugar pricing. In perspective, Australia, the world’s tenth largest sugar producer, exported 3.3million tonnes of the 4.36 million tonnes of sugar produced here in 2021.

Recently, we have seen rate rises delivered not only by Australia’s Reserve Bank, but there have also been likewise moves in the United States, from the US Federal Open Market Committee. On the ground, rate rises put pressure on producers as a rise in costs, and that pressure reflects on world sugar prices.

Ongoing cost-of-production pressure with high fuel and fertiliser and chemical costs have all taken a price increase in the recent past, soaking up a large proportion of added income drawn from a strong sugar price.

As we see the world economy in a somewhat precarious situation as a result of Covid, instability from Chinese expansionism and the Russian invasion of the Ukraine, we hope to see some settling of these increases in the near future so that we can again get a real grasp on our cost of production.

While we are dealing with fluctuating prices most growers are like any business and are not able to see into the future and what farm input price rises will mean to their business in the long term.

Even though we have seen a softening of prices, growers have had the opportunity to take advantage of the stronger prices that were available in the past months. As a result of Marketing Choice legislation, Forward Pricing has been an added optional management tool that growers have had access to for the past 10 years or so. It gives growers that take this option the ability to insulate themselves from the price volatility that we are seeing at this stage.

With that said, prices are still very attractive, and growers will continue to make the best of all opportunities as they arise.

Raw Sugar on the move at Mackay Sugar Terminal. Picture: Contributed

‍