SUGAR prices have risen to their highest level on international markets since October 2013 on the back of supply interruptions in Brazil, the world’s largest sugarcane producer.
There has been heavy rain in key Brazilian sugarcane growing regions, which will delay both the sugarcane harvest itself and then the crush of the crop.
It has sent the spot price for sugar up to levels not seen since 2013 as end users struggle to find supplies.
But Commonwealth Bank commodity analyst Tobin Gorey said the problems were now substantial enough to have a permanent impact on the supply and demand sheet and not just be a temporary supply driven price spike.
“The Brazilian crop issues won’t reverse themselves from here on in.”
From an Australian perspective this price spike is welcomed, but it has come with production woes of our own.
The massive east coast low that has delivered widespread flooding to parts of Queensland, NSW and Tasmania has also been damaging to the southern sugarcane belt, centring on southern Queensland and northern NSW.
Meanwhile, sugar futures had back to back days of big gains late last week, also making important gains on the spreads, with little difference now between July and March futures prices.
Mr Gorey said he was hearing the trade was now buying back some sugar they have sold but now might have trouble producing or sourcing.
After several spikes over the past six weeks, Mr Gorey said he was more confident now that the rally would be sustained.
“We were concerned that buyers might be thin on the ground for such a large volume at high prices but for now it clearly is not a problem.”
