Qld Sugar announces record advance rate
June 17, 2009
Queensland Sugar (QSL) has announced a record initial advance rate of $250 per tonne of raw sugar for all of its pool.
Chairman Alan Winney says the advance for the 2009 season is forecast to return a total payment in the order of $425 to $450 per tonne.
"In comparison to last year the initial advance rate for the 2009 season is an increase of almost 39 percent on the 2008 figure of $180. The 2008 pool is currently nearing completion of its marketing and shipping program with an overall return estimated to be approximately $335 per tonne," he says.
The medium-term outlook for the Australian sugar industry is positive, with sustained growth in demand outstripping available supply, according to Winney.
"At the present time, Indian production is substantially reduced, and its import program is expected to be a major factor in world trade over the next year," he says.
"On the supply side, the market is expected to comfortably absorb another record production year from Brazil as logistics and credit availability test the Brazilian mills' ability to harvest, price and move all of their sugar. The risk is skewed towards an upward movement with futures contracts showing very strong prices as far ahead as three years forward."
While a strong world price is being impacted by a strong Australian dollar, the current offering price is attractive considering the benchmark of previous prices.
"QSL has an eye to the future and we are very mindful that cane growers are making planting decisions now for the 2010 season," Winney says.
"Given this, QSL are making every effort to make cash available to the industry as early as we can.
"We are also provided the opportunity for millers and growers to lock in the current attractive prices out to 2011 season via QSL’s long-term target pool."
Injecting cash into the industry and providing reasonable prices for future seasons should lead to production growth for struggling millers and growers.
"The market looks fundamentally strong with ICE No.11 raw sugar futures prices currently trading at the highest level since 2006 on the expectation of a supply deficit for the 2008/09 Oct/Sept statistical year," Winney says.
Current indications reveal that the 2009/10 year will also be in deficit, which is supportive for longer-term values.
"Destination refiners have recently been hesitant in buying at the current ICE No.11 prices, but with the US dollar weakening, we are starting to see refiners back in the physical and futures markets," he says.