The Australian sugar industry concedes its chances of seeing the Trans-Pacific Partnership (TPP) agreement ratified are “very dim” following the election of Donald Trump, an avowed anti-trade liberalist.
Nonetheless, chief executive of the peak body Canegrowers, Dan Galligan, said not all of the American President-elect’s rhetoric should be interpreted negatively by the agricultural sector.
He said the TPP agreement’s doubling of the access of Australian sugar into the United States from 80,000 to 160,000 tonnes was “profound” — not because of the volume involved but it ‘opened the door’ to a US domestic market in which a 4.5 million tonne deficit in sugar was expected in the next decade.
“So, in terms of lost actual trade, in reality, not huge but lost future potential, very dramatic,” Mr Galligan said.
Australian cane growers are the only sugar farmers in the world to compete in a totally unregulated market, which is why they invested so heavily in securing the passage of the high-level, multi-lateral trade agreement.
It took 12 Pacific Rim countries more than five years to negotiate and needed to be ratified by at least five signatories to be confirmed. But the industry has acknowledged the TPP agreement is now dead and buried.
The industry would work closely with Australian trade officials to assess the ‘fall out’ of losing the TPP agreement and explore other opportunities.
“On trade, Trump hasn’t said only negative things,” Mr Galligan said.
“He’s said America will do trade deals that are in the best interests of America.
“I think they’ll also be looking to do more bilateral trade work, so I don’t think they’re very keen on multi-lateral trade negotiations and they’re very difficult deals to do anyway.
“The main thing is we’ve just got to understand Australian farmers need trade and we need to be open to making trade negotiations but they also need to be in the best interests of the Australian industry as well.”
Sugar markets stable
Sugar analysts are breathing easier after yesterday’s plunge in commodity and equity markets.
Queensland Sugar Limited general manager for trading Dougal Lodge said after the volatility of the past 24 hours, trading is back to normal and there is an expectation of a further price increases as world sugar stocks head toward a predicted 10-million-tonne deficit.
“I think the good news is we’re now trading on fundamentals,” Mr Lodge said.
“Hopefully we’re not going to see the market fall off a cliff or anything in the short term because there is a large amount of buying sitting below the market and we might see a potential test on the upside to where we’ve been in recent history between now and March next year.”
The ICE number 11 had been trading at three-year highs, with canegrowers being paid an Australian equivalent price of more than $600 per tonne for sugar.
But many canegrowers who supply Wilmar’s nine sugar mills in north Queensland have been unable to lock in forward prices because negotiations over a new cane supply agreement have broken down.
“We do have a little bit of time up our sleeve but then further out, we’re definitely seeing there’ll be a return to a more normal supply and demand situation,” Mr Lodge said.