Raw-sugar futures for March delivery broke 36 cents a pound in InterContinental Exchange trade, the highest price since November 1980. White sugar on London’s Liffe exchange hit a record of $853.70 a metric ton for March delivery.
Cane farmers in Australia’s sugar industry already faced losses after flooding soaked Queensland in late 2010 and early this year during the key harvesting and crushing period. Australia is the world’s third-largest sugar exporter, after Brazil and Thailand.
Farmer’s group Canegrowers estimates losses of more than A$500 million, including crop losses and damage to farming infrastructure from Cyclone Yasi, which is headed for the prime growing and milling region.
The sugar market has already seen recent highs on supply concerns. The cyclone “is playing into the psychology of the sugar market,” said Luis Rangel, a vice president at ICAP Futures. “This just gives it an extra boost.” Raw sugar prices have soared 73% over the past five months.
“If weather volatility results in a 2% shortfall in our production forecasts, then the balance sheet will at best be in equilibrium” in the 2011-12 season, sugar trade house Czarnikow said.
According to Australian forecasting bureau Abares, the just finished harvest yielded a crop of only 3.6 million tons of sugar, the lowest level in almost 20 years. Analysts said predictions of 4 million tons for the coming harvest could prove too optimistic.
The raw-sugar market has seen dramatic price swings recently, but some analysts say potential damage could raise the floor.
“We’ll find some support at that 35cents a pound level until we see if there was damage from the cyclone,” said Michael McDougall, a senior vice president at brokerage Newedge.
The source article Sugar Prices Hit New Heights on Australian Cyclone was published February 2, 2011 by Bloomberg via Wall Street Journal .