AFTER hitting a multi-year high, drier weather is likely to result in lower sugar production in Australia in the year ahead against the backdrop of continued weakness in world sugar prices.
In a review of the sugar industry, Rabobank pointed to the prospect of an El Nino weather event during 2015 as highlighting the prospect for a decline in output in Australia.
"A drier-than-normal spring has assisted an operationally smooth [sugar] harvest," it said in its latest quarterly review. "However, concerns have now been raised for the 2015 crop, with below-average rainfall forecast through the next quarter, along with the likelihood of an El Nino event."
For the 2014 sugar-crushing season, which is just finishing, Rabobank estimates the volume of Australia's sugar crushed will hit a five-year high of 32.3 million tonnes, coming in just below the 10-year average of 32.9 million tonnes.
The Australian Bureau of Agricultural and Resource Economics (ABARES) has forecast sugar production will total 4.6 million tonnes.
However abundant production globally, along with a high level of stocks, is weighing on sugar prices which have fallen back to their lowest levels since at least 2009, although the softness of most currencies against the US dollar providing a handy cushion for most countries, the report noted.
Rabobank has, for the first time in the five years, forecast a decline of 1.8 million tonnes in global sugar supplies in 2014-15.
With the outlook for production in Brazil remaining difficult to forecast, since a large part of its sugar crop is used to produce ethanol as an additive in the gasoline sector, Rabobank did project a further decline in China's sugar production of 12 per cent against the backdrop of a 4 per cent rise in demand.
In its December quarterly forecast, ABARES said Australian raw sugar exports would rise 6 per cent in 2014–15 to 3.3 million tonnes, worth an estimated $1.5 billion, up 7 per cent, with higher volumes more than offsetting the impact of lower prices.
Also in December, Queensland Sugar, which markets most of its output, said it anticipates the global market for sugar is likely to move into deficit in the third quarter of 2015.