FORWARD selling of NSW sugar, a well-managed hedging program and higher yields look to be buffering the state's cane growers from downward trending global sugar prices.
NSW growers expect returns of $28 to $30 a tonne of cane in the bin, down just slightly on last year's $31.
That equates to about $440/t of raw sugar, depending on sugar content levels, which compares favourably to the current Queens-land price of $380/t.
Against a backdrop of global sugar prices that are down 23 per cent year-on-year, that price augers well for ongoing growth in production across the state's three cane-growing rivers, the Tweed, Richmond and Clarence.
Raw sugar traded in New York on the Intercontinental Exchange (ICE), the global benchmark, was this week at US10.88 cents a pound. It hit a low of US10.39 mid-year, the lowest for the sugar price since 2008.
Rabobank commodity analyst Georgia Twomey said the global price reflected high stocks, a depreciating Brazilian Real and ongoing strong production.
The Brazilian Real was almost 40pc down year-on-year against the US dollar, ensuring high returns to Brazilian sugar producers and providing little incentive to contract production, she said.
Despite potential for further weakening of the Brazilian Real, Rabobank forecasts a tightening of the balance sheet with reduced production in China and weather risks in India and Thailand currently providing some support.
She said the expected world deficit in 2015-16 of about four to five million tonnes will be the first contraction in stocks in five years.
However, it was a relatively small deficit and the affect on prices in the near term was not expected to be major.
With harvesting due to finish mid-December, the NSW crop is cutting 16pc over estimates, which means it could finish at 2.2 million tonnes, making it one of the largest ever crushed in NSW.
Last year, 1.54 million was crushed.
Yields are up 15pc across the board, courtesy of ideal growing conditions in summer and autumn and a lack of big losses to floods, but the larger 2015 crop is also the result of more land moving back into cane.
NSW Canegrowers Association president Ross Farlow said a well-managed hedging program on the part of the NSW Sugar Milling Co-operative during the past four to five years had removed much of the pricing volatility in the game and combined nicely with solid global prices up until this year to boost borrowing confidence amongst producers.
"Ongoing price stability makes it much easier for a farmer to approach his bank and that has resulted in an increase in on-farm investment," Mr Farlow said.
"We've seen upgraded equipment but we've also seen the re-establishment of farms to full cane production, where during the downturn in prices 10 years ago, growers had diversified into beef, other crops and off-farm income."
NSW Sugar Milling Co-operative chairman Ian Causley said 60pc of this season's crop had been forward sold at higher rates than what the market was currently handing out.
He said aggressive cost-cutting by foreign-owned millers in the dom-estic market was hurting NSW sugar, but the co-operative had also secured overseas contracts.
A 25,000t shipment of NSW sugar was sent to Japan and a second one was due in November.
"Japan has been taking Australian sugar for some years however this is the first time they have sourced from NSW," Mr Causley said.
Bumper cane crop at Pottsville
FOR second-generation Tweed Valley sugar producers, brothers Craig and Brett King, yields 30 per cent above average this season will offset the decline in sugar prices to keep business ticking over.
The brothers have 130 hectares under cane at Pottsville and send about 9000 tonnes of cane to Condong mill annually.
Craig King (pictured) said moderate and timely rainfall, a lack of severe floods and no frosts had made this season one of the better ones he'd seen in his time growing cane.
"We've had a run of pretty bad seasons up until this year but we have been lucky that prices have been good," he said.
"Now the situation has reversed - combining good yields with good prices is very rare.
"But I think it's a real positive for our industry to see the NSW crop back on track."
The print version of this article incorrectly stated the Brazilian Real was almost 70pc down year-on-year against the US dollar. That is incorrect. It has in fact fallen nearly 40pc, as stated in this article.
