Extreme weather in Australia, US damages crops
By DAVE WILKINS
Sugar prices have been rising, driven by freeze damage, floods and cyclones around the world.
Raw sugar contracts trading on New York's Intercontinental Exchange reached a 30-year high of 36.08 cents per pound on Feb. 2.
Despite a pullback since then, some analysts believe the market has more room to run in the months ahead.
"The supply and demand estimates we have seen are only getting more challenging," Frank Jenkins, president of the Jenkins Sugar Group, said Feb. 8. "I don't think the high for this bull market is in place yet."
Extreme weather has driven much of the recent gains.
Heavy rains flooded the sugar production region of northeast Australia in November and December. The same region was slammed by tropical cyclone Yasi earlier this month.
Australian authorities are still assessing the damage, but they're certain that sugar production will be greatly reduced.
"This year, the Australian sugar industry has suffered from the most extreme weather events we have seen in a generation," officials with Queensland Sugar Limited, said in a statement earlier this month.
The company accounts for about 90 percent of Australia's sugar exports.
In estimates released before the storms, the USDA said that Australia would likely be the world's third largest sugar exporter this year.
U.S. sugar cane production has also been hit.
The USDA recently reduced estimates of sugar cane production in Florida due to a severe freeze in mid-December.
According to processor reports, the freeze resulted in widespread damage to existing sugar cane crops and recently planted cane meant for harvest next year.
The USDA in January reduced its estimates of U.S. sugar production for fiscal year 2011 by 88,000 tons from the previous month.
The agency will continue to monitor market conditions and could relax import restrictions if it determines that supplies are too tight.