Sugar Crush Challenge

By Kevin Borg, Chairman, CANEGROWERS Mackay
With a delayed start to the crush, it is imperative that mills now settle down to a strong and consistent crush rate.
We should be far ahead of current percentages of the crop processed, which is still markedly below 10% in Mackay and Plane Creek. There are growers in both milling areas who, at the time of writing, have not been able to cut. This is plainly unacceptable. The season start has been dogged by poor weather, industrial action and continuous mill breakdowns.
Many growers have a large percentage their crop of forward priced. That means, they have a commitment to getting their crop away, and contractual arrangements mean that they carry all the risk should they not have their full 2024 crop harvested.
Prices are reasonable, but down by several hundred AUD a tonne compared to the dizzying highs of 2023. That reasonable price should continue on a trend of world supply not meeting consumer demand. World sugar prices are driven by a variety of factors, including stock and money markets, weather influences, crop health, government policies and reserve bank actions, to name but a few. But on the whole, the primary drivers are the sugarcane crops of the big three sugar producing countries: Brazil, India and Thailand.
Brazil’s crop estimate this year has been reduced. Although harvest has progressed well, there is a reduced CCS and cane supply, impacted by dry conditions. Nonetheless, to give a sense of scale, at the start of July, Brazil’s season to date has seen 189 million tonnes of cane crushed of an estimated 605 million, with 49.38% going to sugar, and the remainder to ethanol production. Brazil’s government maintains fuel security for the nation by subsidising and setting an adjustable quota on ethanol production.
In contrast, Australia’s annual production is around 4 million tonnes of raw sugar from 35 million tonnes of cane. Despite our smaller production levels, Australia remains an attractive market because of our stable supply chain and stronger sustainability credentials than many other sugar-producing nations.
India is now into its growing season, with the monsoon having a late onset this year. Rainfall is improving in most cane growing areas, but there is a reduced production estimate for 2024/25 at 34.5Mt of cane. The country retains the bulk of its sugar for domestic use and has been increasing its ethanol production.
Thailand has had some years of drought, which had led to growers exchanging cane production for the more drought-resilient cassava. This year, there has been improved rainfall which, combined with a still buoyant sugar price versus a declining cassava price, may entice growers there to return more land to sugarcane production.
Growers continue to contend with high cost of production, largely driven by high fuel and fertiliser costs, but with many other influencers in the mix- such as insurance, rates and land costs. And the many sundries of small business.
People see the big numbers associated with the world sugar price, but the way growers market their sugar can mean that growers are not necessarily receiving that very high price for sugar. Growers maintain an approximate two-thirds interest in the sugar produced from their cane. This is called Grower Economic Interest (GEI). Of that, the grower can forward price a good percentage of their crop up to three years out.
Forward pricing offers security in a fluctuating market that does have some deep troughs. We only have to go back to as recently as 2020 and the influence of Covid 19 to see the price drop to $AU355/tonne of sugar, to the GFC of 2008 to see around $200, and a range of troughs associated with drought years and economic events. In the early to mid-80’s we saw years of low prices, bottoming at a cataclysmic $77.85/tonne in June 1985.
So, being aware of our cost of production, growers will lock in good prices that sit above that. It might mean missing the super peaks of the market, but equally, hopefully avoiding those price troughs. It offers good security for the business cash flow in the long-term.
But it does all depend on the millers successfully processing the crop.

Growers retain an economic interest in their sugar as it moves to market. Photo credit: Kirili Lamb

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