Bitter Aftertaste of Queensland Flood is Higher Prices of Sugar in Global Markets

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By Vittorio Hernandez | January 31, 2013 9:53 AM EST

Farmers and other stakeholders in Australia's sugar industry have expressed concern over the bitter taste the current Queensland flood will have on prices of this sweet commodity.

In an interview with Radio Australia, Tony Castro, a sugarcane farmer who tills 130 hectares in northern Bundaberg said that his plantation remains cut off due to the flood. He said that due to the light finish to this season's harvest caused by 2012's inundation, some of the crops have not advanced in size. He warned that if the canes remain submerged for the next three to four days, there is a possibility the cane may die.

On the local consumption side, Aussies are using more sugar, which averages 20 teaspoons a day, according to this report.

On the production side, Australia is the world's third largest exporter of sugar. However, the devastation of sugar lands could cause some farmers to quit, said Steve Greenwood, head of the peak industry group Cane Growers.

Mr Greenberg said most of the damage was in three areas - Bundaberg, Maryborough and Childers. The first two areas jointly account for almost 2.5 million tonnes of sugar production.

Prior to Cyclone Oswald, CaneGrowers forecast a harvest of 32 million tonnes for 2013, which would be readjusted downward between 31 and 32 million tonnes. When Cyclone Yasi battered Australia in 2011, New York sugar prices climbed 35 cents, which is a 30-year high.

Besides sugar, other crops such as citrus, macadamia and avocado in Queensland have also been affected. Alex Livingstone of the peak horticulture body GrowCom said.

Queensland Deputy Premier Jeff Seeney, who visited Gayndah on Wednesday, estimated the damaged to citrus orchards at over $100 million.

However, aside from the loss of sugar production from Australia, another reason behind the rising price of sugar in the international market is speculations that Brazil, the world's largest sugar producer will direct more cane to ethanol production after the announcement by the state-controlled oil company of a 6.6 per cent increase in gasoline prices at refineries.

On Wednesday, raw sugar for March delivery went up 1.9 per cent to 18.72 cents a pound on ICE Futures U.S. in New York, while refined sugar prices inched up 1.3 per cent to $493.90 a metric tonne on the NYSE Liffe in London.

The Queensland floods, which had so far taken six lives, also negatively impacted the production and delivery of another major commodity - coal as coal mines were flooded and railways submerged.

More update about the Queensland floods in this Aljazeera report.

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