Grower Pricing Update – August 2021

Raw sugar prices spent the majority of August rallying higher as the ever-deteriorating Centre South Brazil crop whipped the market into a bullish frenzy. 

At the time of writing, the October 2021 ICE 11 contract had traded from its monthly low of 17.74 USc/lb up to a high of 20.37 USc/lb, breaking the 20 USc/lb level for the first time since February 2017. 

This sparked a fresh rush of grower pricing activity, with up to $610/tonne gross actual and $545/tonne gross actual achieved in the 2021 and 2022 Target Price Contracts respectively.

Click here to read our full Grower Pricing Update.

Wilmar Sugar’s first shipment departs Mackay

The first raw sugar of the 2021 growing season has been shipped out of the Port of Mackay with many local cane growers eagerly watching on as raw sugar produced at their local mill headed south.

Wilmar’s Plane Creek grower marketing consultant, Angus McKerrow and Mackay Sugar Terminal mechanical supervisor, Hamish Beveridge said the Mackay port tour was organised to provide cane growers throughout the region with insight into the sugar supply chain from the farm to the supermarket shelf.

The raw sugar was loaded into the MV Mareeba bulk carrier and destined for Sugar Australia’s Yarraville Refinery in Melbourne where it will be processed into a variety of products for CSR Sugar and Australian food and beverage customers.

Mr McKerrow said nine growers from the Plane Creek region had attended the port tour and were excited to see the raw sugar from their local mills being loaded onto the ship.

“It was the first shipment for the 2021 season, so it was also about growers being present for that milestone: the first of the new season sugar to leave the region.”

Mr McKerrow said the growers got an appreciation for the processes around storing and loading sugar, and the procedures around quality sampling.

“The logistics of handling sugar from delivery, through to storage and loading are quite complex, and there are a lot of controls in place to maintain the quality of that sugar from port to port,” he said.

“Many thanks goes to Mackay Terminal Manager Mike Panke and Hamish Beveridge for facilitating such a great tour.”

The raw sugar departed Mackay Port on July 20 and was produced at Wilmar’s Plane Creek and Proserpine mills.

Record Shared Pool caps season

Queensland Sugar Limited (QSL) has finalised its 2020-Season pricing results, with the industry-owned sugar marketer notching up a record weighted average Shared Pool result of +$31 per tonne.

The Shared Pool captures QSL’s operating costs, premiums, other revenue, and the Loyalty Bonus where applicable, and is applied to every tonne marketed through QSL.

QSL General Manager Marketing Mark Hampson, pictured right, said the 2020 Shared Pool return for tonnage priced on the global ICE 11 raw sugar market was a new high for the marketer, which has been marketing sugar on behalf of Queensland cane growers and sugar millers for nearly a century.

Mr Hampson said the strong result reflected the high physical sales premiums available for Australian raw sugar last year, following a significant drop in production out of Thailand, one of our nation’s largest sugar competitors.

“The failure of the Thai crop due to drought in early 2020 and its subsequent slow recovery saw very strong demand for sugar last year in Asia, our primary market,” Mr Hampson said.

“As we’re a not-for-profit, pass-through organization, those higher net marketing returns were passed back to growers through the Shared Pool. That, and a long-awaited improvement in the ICE 11 sugar price saw QSL pools and grower-pricing results increase year-on-year.”

The February 2020 Guaranteed Floor Pool emerged as QSL’s best-performing ICE 11 pool for the season, returning $493/t IPS net, while the US Quota Pool, priced on the ICE 16 and automatically allocated to all QSL growers, returned $702/t IPS net (click here for QSL’s full 2020 pool results).

The highest grower-managed pricing achieved for the 2020 Season was $497/t gross actual in the Target Price Contract, with $456/t gross actual the weighted average price achieved for the season in this popular pricing option.

Mr Hampson said that while physical sales premiums had tempered for the 2021 Season, strong ICE 11 prices were still translating into attractive returns for Queensland sugar producers.

“QSL has seen record levels of grower-managed pricing in the past six months as our growers sought to lock in 2021-Season prices above the key $500/t level,” he said. 

“The 2021-Season Target Price Contract passing $550/t this week, while QSL-managed pools are also off to strong start, with the 2021 Harvest Pool currently returning a weighted average of $516/t IPS net and the Actively Managed Pool not far behind it on $513/t IPS net.” (Click here for current market levels)

While Thailand is continuing to rebuild its crop, all eyes are now on the world’s largest sugar producer, Brazil, which has had a dry start to their season, prompting crop revisions and hopes of a continuing deficit market and associated strong sugar prices.

“With a decent Queensland crop in the paddock and attractive sugar prices, it’s shaping up to be a good season after a couple of tough years,” Mr Hampson said.
 

For more information contact Cathy Kelly on 0409 285 074

New free trade agreement to deliver jobs and business opportunities in Australia and The United Kingdom

  • Joint media release with: The Hon. Scott Morrison MP, Prime Minister

15 June 2021

A new free trade agreement with the UK will deliver more Australian jobs and business opportunities for exporters, bringing both countries closer together in a changing strategic environment.

Prime Ministers Scott Morrison and Boris Johnson have agreed on the broad outlines of an Australia-UK Free Trade Agreement (FTA).

The FTA is the right deal for Australia and the United Kingdom, with greater access to a range of high-quality products made in both countries as well as greater access for businesses and workers, all of which will drive economic growth and job creation in both countries.

Australian producers and farmers will receive a significant boost by getting greater access to the UK market.

Australian consumers will benefit from cheaper products, with all tariffs eliminated within five years, and tariffs on cars, whisky, and the UK’s other main exports eliminated immediately.

The UK will liberalise Australian imports with 99 per cent of Australian goods, including Australian wine and short and medium grain milled rice, entering the UK duty free when the agreement enters into force.

Beef tariffs will be eliminated after ten years. During the transition period, Australia will have immediate access to a duty-free quota of 35,000 tonnes, rising in equal instalments to 110,000 tonnes in year 10.

In the subsequent five years a safeguard will apply on beef imports exceeding a further volume threshold rising in equal instalments to 170,000 tonnes, levying a tariff safeguard duty of 20 per cent for the rest of the calendar year.

Sheep meat tariffs will be eliminated after ten years. During the transition period, Australia will have immediate access to a duty-free quota of 25,000 tonnes, rising in equal instalments to 75,000 tonnes in year 10. In the subsequent five years a safeguard will apply on sheep meat imports exceeding a further volume threshold rising in equal instalments to 125,000 tonnes, levying a tariff safeguard duty of 20 per cent for the rest of the calendar year.

Sugar tariffs will be eliminated over eight years. During the transition period, Australia will have immediate access to a duty-free quota of 80,000 tonnes, rising by 20,000 tonnes each year.

Dairy tariffs will be eliminated over five years. During the transition period, Australia will have immediate access to a duty-free quota for cheese of 24,000 tonnes, rising in equal instalments to 48,000 tonnes in year five. Australia will also have immediate access to a duty-free quota for non-cheese dairy of 20,000 tonnes.

Working Holiday Visa makers in the UK will get expanded rights and will now be able to stay for three years with an increased cut off age of 35.

Professionals will benefit from provisions to support mutual recognition of qualifications and greater certainty for skilled professionals entering the UK labour market.

This ambitious bilateral free trade agreement will help pave the way for the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

The two countries will now finalise the text, and carry out the domestic processes required to enable signature and the subsequent entry into force of the FTA.

Media enquiries

Australia’s complaint against Indian sugar subsidies to be heard at World Trade Organisation

Two-and-a-half years after lodging a complaint to the World Trade Organisation (WTO) against India, Australian sugar cane growers will finally have their concerns heard in the international court.

The formal dispute against India was initiated by the Australian, Brazilian and Guatemalan governments in 2018, saying subsidies for Indian cane farmers caused a glut in the international market and led to a significant drop in global prices.

Paul Schembri, chair of Queensland and Australian Canegrowers associations, said it was a relief the hearings were finally going ahead.

“It’s a frustrating process for Queensland farmers, but we can hopefully see light at the end of the tunnel,” he said.

It is a process other industries will be following closely, as Australia prepares to escalate action against China to the WTO over barley tariffs.

In a statement, the Global Sugar Alliance, which represents 85 per cent of the world’s cane sugar exporters, said it had met and reaffirmed its full support “to remove India’s export subsidies and trade-distorting price supports”.

Australian canegrowers and the Federal Government made the initial complaint, which has gone through formal discussions and mediation.

“We think it’s a blatant breach of WTO rules,” Mr Schembri said.

“Those subsidies have destroyed the world price. For Australian producers, who are highly exposed to world prices, it’s costing us something like $300 million or $400 million a year in lost opportunities and income.”

Decision ‘hopefully’ in early 2021

Formal hearings are usually held in person in Geneva, but due to COVID-19 they will be moved online.

The hearings were initially due to be held in May but were postponed because of the pandemic and have been rescheduled for a few weeks’ time.

“They’ll be undertaken by a virtual format, and that gives us some hope now in Australia that we can get a decision possibly in 2021,” Mr Schembri said.

This is not the first time sugar subsidies have been in front of the WTO, with the European Union’s supports declared illegal in 2004.

A cane harvester cutting sugar cane in the afternoon sun.
Queensland’s cane crush is coming to an end for the year.(ABC Wide Bay: Brad Marsellos)

Mr Schembri hopes to see similar results this time around.

“That result came down in favour of Australia and immediately the world price increased very substantially,” he said.

“For a period of five to 10 years we had a strong growth in those world prices.”

Australian cane farms rely on the global raw sugar prices to drive profit, with about 85 per cent of domestic production exported.

With the global price of sugar often below the cost of production, Mr Schembri said he was hopeful the hearings would lead to long-term change.

“We’re hoping if a decision comes down, we’ll get a turnaround in the world price and that this is sustainable, and that going forward, we can have continuous access to world prices that reflect the cost of efficient producers.”

Alternative solutions

Rather than introducing excess sugar onto the global market, the Global Sugar Alliance has called on India to use its product to develop an ethanol industry.

In a statement, the executive director of the Brazilian Sugarcane Industry Association, Eduardo Leão de Sousa, said his country was working closely with India.

“This biofuel will help to improve air quality in India’s major cities, reduce the country’s greenhouse gas emissions and reduce India’s reliance on imported oil,” Mr de Sousa said.

It is a solution Mr Schembri would also like to see.

“Historically, 93 per cent of decisions ultimately are complied with; we’re hoping India will obviously acknowledge, to stop funding these subsidies or direct surplus sugar into something else such as ethanol,” he said.

Threat of further Indian subsidies weighs on sugar price

The Global Sugar Alliance has called on India to drop its controversial sugar subsidies, adhere to international trade rules, and meet the obligations and commitments it has made as part of its membership of the World Trade Organisation (WTO).

The Global Sugar Alliance, which represents 85% of the world’s cane sugar exporters, believes the world sugar market does not need India’s threat of another round of sugar subsidies, which continue to depress the world sugar price, imposing an enormous cost on the world’s most efficient sugar producers.

Global Sugar Alliance Chairman and Queensland Sugar Limited (QSL) Managing Director, Greg Beashel said Global Sugar Alliance members are fair traders who abide by their WTO obligations and as a respected country with its own high standards, they expect India to do the same.

“As demonstrated 15 years ago, after the removal of European Union sugar export subsidies, world sugar prices quickly rise towards fair value when export subsidies are removed. The same will occur when India abandons its sugar subsidy program,” Mr Beashel said.

Global Sugar Alliance members have met and reaffirmed their full support of the case Australia, Brazil and Guatemala have taken in the WTO to remove India’s export subsidies and trade-distorting domestic price supports which violate India’s commitments to the world community.

“One factor underpinning the recent strength of sugar prices has been the delay in India’s subsidy announcement,” Mr Beashel said.

“Without subsidies world prices need to rise to a level that would allow India to export commercially and fairly. We would welcome India’s subsidy-free participation in the world market.”

News that WTO processes are recommencing after significant COVID-19 interruptions is welcome. Now looking forward to a swift resolution of the case that Australia, Brazil and Guatemala have taken in the WTO, the Global Sugar Alliance calls on India to consider alternative, non-trade-distorting solutions to deal with its subsidised surplus sugar production, such as hastening the development of its ethanol market.

Executive Director of The Brazilian Sugarcane Industry Association (UNICA), Eduardo Leão de Sousa said Brazil had been working closely with India, exchanging ideas and technology to contribute to the development of an Indian ethanol industry, based on Brazil’s almost 50-year experience using ethanol as fuel on a large scale.

“This biofuel will help to improve air quality in India’s major cities, reduce the country´s greenhouse gas emissions and reduce India’s reliance on imported oil,” he said.

“Moreover, it will offer India a strong, viable outlet for its surplus sugarcane, providing a market solution for its sugar industry and cane growers, without adversely affecting the national and international sugar markets.”

Leopoldo Bolaños, International Trader, Guatemalan Sugar Association said Improved trading conditions are in everyone’s interests. We encourage India to comply with its WTO commitments.

Sandra Marsden, President, Canadian Sugar Institute India’s sugar supports have set agricultural trade reform back, at a time when the world economy is struggling under the weight of increased protectionism. It is in all of our interests that these supports, along with other distorting measures in the world sugar market, are removed.

Vibul Panitvong, Chairman of the Executive Board, Thai Sugar Millers Corporation said all Global Sugar Alliance members are urging our governments to work together as a matter of urgency to solve the India sugar dispute and strengthen the world sugar trade.

Mr Beashel said the Global Sugar Alliance’s priority was to secure a world in which sugar could be traded freely across regional and global markets.
“Eliminating India’s export sugar subsidies and complying with its international obligations will be a good place to start,” he said.