THE volatile and cyclical nature of the sugar industry was discussed in a global context at the inaugural Rabobank sugar symposium in Ayr last week.
About 200 growers travelled from across North Queensland growing regions including Mossman and Mackay to hear tips from international experts about how best to manage fluctuations in profitability.
Rabobank’s global sugar strategist Andy Duff travelled from Brazil to give insights into the industry.
He discussed the key cyclical and structural changes facing the sugar market, in particular the current price cycle, the impact of government intervention on supply and demand fundamentals, and changes in global consumption patterns.
Mr Duff highlighted the importance of not over-capitalising when the price was high to provide a better buffer when the market turned.
“The way a business operates in a highly cyclical market, there are one or two things key to maintaining a good robust financial situation through these sorts of cycles,” Mr Duff said.
“Not to over leverage and make enormous investments at the peak of the cycle, because nothing good lasts forever and high prices certainly don’t, and also not to lose sight of the fact that those moments when things are going well, this is a commodity business and cost control is always key to long term competitiveness.
“So it’s to think about maintaining that in your sights when the market is on the way up, will help you very much when inevitably the market turns.
“The message is the cycle is not over, that’s going to be a continuing feature for Australians and Brazillians, and because it can be quite extreme you have to be quite conservative about how to manage finances through the cycle.”
Mr Duff also spoke about sugar taxes which have been introduced in some countries and global sugar consumption.
Australian-based sugar analyst Georgia Twomey said ethanol could provide an alternative option for growers if demand for raw sugar declined.
“In Brazil you do see a change in the ethanol and sugar mix as to which is going to be the most profitable for the mills and they do have that flexibility which is different in terms of how the industry operates over here,” Ms Twomey said.
“Government policy is potentially a long way from making that a reality or how it will operate in the future in Australia.
“From a growers perspective it really comes down to that they are delivering cane the most efficiently as they possibly can and those types of policies will evolve as government policy and commercial interest drive them.”
