FROM THE CHAIR By Paul Schembri, Chairman CANEGROWERS
PRICE LIFT BUOYS INDUSTRY Strong world sugar prices are injecting much needed confidence and optimism into the Australian sugar industry. Recently, the world sugar prompt price hit 20c/lb US – a price that just six months ago seemed unthinkable. News of the severe impact that drought and frost is having in Brazil has some commentators suggesting the Brazilian crop could be down by as much as 100 million tonnes of cane.
So it’s important to harvest these high prices while they last.
We certainly have come a long way from a single average sugar price.
There is sometimes a mistaken view that forward pricing should capture only price highs.
Weather impacts are not just confined to Brazil. It has been reported that weather events in North America, Europe, and Asia have impacted on global sugar production.
But every grower has a different risk profile.
I am proud that CANEGROWERS has contributed to that journey - securing grower choice and backing it up with education and information.
Coupled with this is the new factor of a world grappling with food security in the COVID era. The current demand for raw materials, minerals, and food is something unseen for a very long time. There is a veritable perfect storm of factors that is finally breaking our way. Of course, a burst of strong prices will not make all of our problems disappear, but at least it is a strong foundation to help stabilise the industry. Australian cane growers are in an enviable position right now, as some of the only sugar producers in the world with the ability to forward price and lock in these highs. For we know, as sure as night follows day, sugar prices will eventually fall.
For some growers, price certainty is more important than holding off and gambling on a price peak that may not come. The level of understanding and diversity of pricing options has increased significantly over the past five years.
With sugar prices playing their part in improving the industry outlook, the question now is will the weather hold out? As I write this column, around 40% of the crop has been crushed.
Whilst many growers undertake their own pricing, some are content with the centrally managed pools that operate in some mill regions.
Weather has been problematic in some regions, particularly in the far north where rain has hampered harvesting and planting operations and frustrated growers.
That form of price risk management, where a mill will lock in pricing for growers, is one that many growers are comfortable with.
Climate reports are pointing to a wet and warm Spring, with above average rainfall. How that plays out will be the key to success of this year’s harvest.
As a grower, I have been amazed and impressed at how cane farmers have grown in confidence when it comes to managing their price risks.
Stronger prices, albeit welcome, are of little value without cane crushed and sugar produced.
A grower recently said to me that at 10am each day he receives a text message updating him on the market situation and then, with his phone marketing app, he places pricing orders.
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Let’s hope that the weather gives us a fair go at harvesting the remainder of the 2021 crop.
