segunda-feira, 7 de fevereiro de 2011

(BN) Sugar Shortage Looms as Storm Ruins Australian Crop (Update2)

By Wendy Pugh
    Feb. 7 (Bloomberg) -- World sugar output will probably fall
short of demand, said Rabobank, after a cyclone with winds
stronger than Hurricane Katrina destroyed homes and smashed
crops in Australia, driving prices to 30-year highs.
    Tropical Cyclone Yasi ripped through northern Queensland, a
region growing a third of the country's cane, cutting output
potential in the area by about 50 percent, producers group
Canegrowers said Feb. 4. The storm, which the government says
may have wiped out at least A$500 million ($507 million) of
agricultural production, raised speculation that the world's
third-largest sugar exporter may struggle to match last year's
output that was the lowest in two decades.
    "The whole house was shaking and vibrating," said Gerry
Borgna, 53, whose family has supplied cane to a mill at Tully,
about 140 kilometers (87 miles) south of Cairns, since the 1920s.
"We could hear things flying past and we thought it was part of
the house." At the farm, power lines were lying across the road,
a shed stood precariously and cane was pushed over. "To me,
this is a disaster," he said.
    Raw sugar soared to 36.08 cents per pound on ICE Futures
U.S. in New York on Feb. 2, the highest level since 1980, as the
storm bore down on Queensland, and traded at 33.03 cents today.
    "On a global basis we thought we would have a slim stock
build this year and it is likely that we are going to end up
with another deficit," Rabobank Australia Ltd. commodities
analyst Wayne Gordon said by phone yesterday.

                        Floods, Rain

    Australian sugar output may be 3.5 million metric tons from
the June to December harvest this year, compared with 3.6
million tons from the previous crop, and down from expectations
of 4.2 million to 4.3 million tons, according to Rabobank.
    Flooding and heavy rain before the cyclone reduced
estimates by about 500,000 tons and Yasi probably cut the
outlook by a further 300,000 tons, Gordon said.
    Output may be 3.8 million tons next season, Australia & New
Zealand Banking Group Ltd. said on Feb. 3, while Commonwealth
Bank of Australia commodity strategist Luke Mathews said the
same day that the crop may be 3.6 million tons.
    "It may well be that the production we saw last year might
be repeated," said John King, chief executive officer of Tully
Sugar Ltd., referring to national raw sugar output. "You would
like to think we can better that still, but a lot depends on the
growing conditions in the next months." The closely held
company is the target of a takeover bid from Bunge Ltd.

                       Weather Risks

    World production may exceed demand by a "small" amount in
2011-2012, though the "fragile" balance will be vulnerable to
weather-related risks, C. Czarnikow Sugar Futures Ltd. said Jan.
31. The market will stay in deficit in 2010-2011, it said.
    The International Sugar Organization in November lowered
its estimate for a global surplus to 1.3 million tons in 2010-
2011 from 2.7 million tons in August after drought and floods
damaged fields in Brazil, Russia, Pakistan and Australia.
    "Based on what we're seeing in the meantime, there's every
reason that our surplus will remain very small," Lindsay Jolly,
a senior economist at the ISO, said in an interview in Geneva
Feb. 1. "It may disappear."
    The destruction in Queensland from Yasi added to rain and
flooding that left 35 people dead and disrupted coal mining. The
nation, facing a bill that economists say may reach $20 billion
after two months of floods, will need to make budget cuts after
the cyclone exacerbated damage, Prime Minister Julia Gillard
said yesterday on Channel Ten's Meet the Press program.

                        Banana Crop

    Yasi also slammed into a banana-growing region representing
about 85 percent of Australian production. Woolworths Ltd.
raised its prices for the fruit on Feb. 4 and warned the damage
would severely affect availability and prices in coming months.
    "The region impacted by the cyclone contributes around A$1
billion of agricultural production annually, and initial reports
suggest at least half of that has been wiped out this year,
including around 80 percent of the state's banana crop,"
Treasurer Wayne Swan said yesterday.
    Queensland Sugar Ltd., which handles more than 90 percent
of Australia's exports, said shipments from the 2010 crop were
2.2 million tons, the lowest level in more than two decades. The
cyclone and "extreme" rainfall since the middle of last year
were likely to keep exports to about the same level next season,
company Chief Executive Officer Neil Taylor said today.

                      Crop Reduction

    The 2011 crop is likely to be "significantly reduced,"
Queensland Sugar said on Feb. 4. The national cane crush last
year was about 27 million tons compared with a usual level of
more than 32 million tons, said Brisbane-based Canegrowers in
December. The area north of Townsville typically crushes 10
million tons, the group said.
    Tully may process about 1.4 million to 1.5 million tons of
cane this year, compared with 1.8 million tons last season when
the harvest was halted because of the weather, and down from a
pre-cyclone estimate for 2011 of 1.8 million to 2 million tons,
King said. Output would likely be curbed again in 2012 because
of the lingering effect on crops, he said.
    "Even putting Cyclone Yasi to one side, it was going to
take a couple of years to rebound from the 2010 season," said
King, who left his shelter in the laundry of his Tully home
during the eye of the storm to see if the mill's smoke stacks
were still standing before "ferocious" winds returned.

                      'Blown Away'

    The stacks survived the night, while two cooling towers
were on the ground, some sheeting was gone from the roof, a
garage was blown away and 35 houses owned by the company had
some form of damage, he said. The Red Cross is using a mill
meeting-hall to provide emergency assistance to residents, many
living in partly wrecked homes with no electricity.
    "We have got off quite lightly from the mill point of
view," King said. The company has until the crushing season
starts in June to complete repairs.
    Maryborough Sugar Factory Ltd. said in a statement last
week it expected a 5 percent to 10 percent reduction in its
total company estimate of 4 million tons of cane for the 2011
season. It has mills north of Tully in a joint venture with
Bundaberg Sugar Co., a unit of Brussels-based Finasucre.
    Cane harvested this year will include so-called standover
material left from 2010 because of rain, cane planted last year
and re-growth crops harvested over several seasons. Borgna, who
estimated the cyclone may have cut his potential output by more
than 20 percent, said he was reluctant to lock in prices for
more of his cane by forward-selling.
    Standover cane was "a mess," some of the crop may reach
half the height it should and root systems were damaged, he said.
    "For this year I am about 40 percent priced," he said,
and he was cautious about pricing more because he didn't know
what crop he was going to get.


For Related News and Information:
Top Stories on Australia and New Zealand :TOPZ <GO>
Top agriculture stories: TOP AGR <GO>
Top Stories: TOP <GO>

--Editors: Jason Scott, James Poole

To contact the reporter on this story:
Wendy Pugh at +61-3-9228-8736 or
wpugh@bloomberg.net

To contact the editor responsible for this story:
James Poole at +65-6212-1551 or jpoole4@bloomberg.net

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