January 05, 2015
Sugaronline
Strong headwinds look set to impact the sugar industry, with abundant global sugar stocks continuing to weigh on world market prices, according to the Australian Broadcasting Corp.
The latest Rabobank sugar update says although prices have been under pressure for some time, projections suggest that world production in 2014/15 will be little different from the previous year.
Georgia Twomey, Rabobank Commodity Analyst says that weather and access to irrigation will be the main factors that determine the fortunes of Australian sugar growers.
"80% of global sugar production today comes from cane.
"Cane is a semi-perennial crop, meaning that if farmers don´t like the current cane price, it nevertheless takes them time to switch land out of cane into other crops.
That is one reason for the slow response to low prices. Another reason is the diminishing incentive to switch to other crops, given that the prices of many other agricultural commodities like wheat, cotton and corn are also falling along with sugar prices," says Rabobank's Georgia Twomey.
"The principal driver of price developments has been the continued weight of global sugar stocks on the market, currently predicted to diminish only modestly over 2015.
"At this stage, it appears that global production in the 2014/15 international crop year has not responded significantly to low prices.
"Other influences on price movements include the effect of the strong US dollar; pressuring international sugar prices, while also sustaining the value of world market sugar in local currency terms in key exporting countries, such as Brazil.
"In addition, developments in oil prices could affect sugar prices in 2015.
"In Australia production should reach 4.6 million tonnes this year. But below-average rainfall forecasts and the potential of an El Nino event raises concerns for 2015," she says.
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