Required Report - public distribution

**Date:** 9/30/2005

**GAIN Report Number:** AS5029

AS5029

**Australia**

**Sugar**

**Semi Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Kathleen Wainio, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Mike Darby, Agricultural Specialist

**Report Highlights:**

Australian sugar production is forecast to decline to 5,200 TMT in
2005/06 while exports are also expected to fall in-line with production.
Forecast lower sugar cane area is the primary reason for declining
production and exports. Post expects sugar cane area to continue to fall
beyond the forecast period.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Semi-Annual Report

Canberra \[AS1\]

\[AS\]

Table of Contents

[SECTION ONE: SITUATION AND OUTLOOK
3](#section-one-situation-and-outlook)

[SECTION TWO: STATISTICAL TABLES 4](#section-two-statistical-tables)

[SECTION THREE: NARRATIVE ON SUPPLY AND DEMAND, POLICY & MARKETING
5](#section-three-narrative-on-supply-and-demand-policy-marketing)

[Sugar Cane for Centrifugal 5](#sugar-cane-for-centrifugal)

[Area (Cut for Crushing) 5](#area-cut-for-crushing)

[Yield 5](#yield)

[Cane Production 6](#cane-production)

[Sugar Production 6](#sugar-production)

[Prices 7](#prices)

[Trade 7](#trade)

[Exports 7](#exports)

[Policy 8](#policy)

[Free Trade Agreements 8](#free-trade-agreements)

[Sugar Industry Reform 8](#sugar-industry-reform)

# SECTION ONE: SITUATION AND OUTLOOK

The Australian sugar cane industry continues to remain under financial
pressure due to low sugar prices. ABARE recently forecast the price of
sugar for 2005/06 to fall and provided poor outlooks for the prospects
of sugar cane producers over the forecast period. Restructuring of the
Australian sugar industry continues to make progress with the Australian
government recently agreeing to additional spending following agreement
on industry reform at the local level.

As a result of the poor outlook for sugar prices, post has revised the
forecast planted area for 2005/06 downwards significantly. Post
anticipates that this downward trend, which began with a fall in the
previous year, represents the medium to long-term outlook for the
Australian sugar industry.

Production of sugar cane in 2005/06 is forecast to increase slightly,
despite falls in the total area of cane harvested. A higher cane yield
following last year's serious rust outbreaks is expected to allow cane
yields to return to levels more reflective of the long-term average.

Sugar production for 2005/06 is forecast to decline slightly despite the
increase in cane crushed. A return to more normal weather conditions
following persistent drought is expected to decrease the Commercial Cane
Sugar (CCS) content of the 2005/06 crop.

Exports of sugar for 2005/06 are expected to fall slightly in-line with
the expected fall in sugar production. A strong Australian dollar and
lower world sugar prices are also expected to place downward pressure on
exports.

# SECTION TWO: STATISTICAL TABLES

+-------------------+------+-------+------+------+-----+------+------+
| **PSD Table**     |      |       |      |      |     |      |      |
|                   |      |       |      |      |     |      |      |
| Sugar,            |      |       |      |      |     |      |      |
| Centrifugal       |      |       |      |      |     |      |      |
+-------------------+------+-------+------+------+-----+------+------+
|                   | **20 | *     | **20 | **Es | **  | **Fo | *    |
|                   | 04** | *Revi | 05** | tima | 200 | reca | UOM* |
|                   |      | sed** |      | te** | 6** | st** |      |
+-------------------+------+-------+------+------+-----+------+------+
|                   | **   | *     | **   | **   | **U | **   |      |
|                   | USDA | *Post | USDA | Post | SDA | Post |      |
|                   | Offi | Est   | Offi | Esti | Of  | Esti |      |
|                   | cial | imate | cial | mate | fic | mate |      |
|                   | \    | \[Ne  | \    | \    | ial | \    |      |
|                   | [Old | w\]** | [Old | [New | \[O | [New |      |
|                   | \]** |       | \]** | \]** | ld\ | \]** |      |
|                   |      |       |      |      | ]** |      |      |
+-------------------+------+-------+------+------+-----+------+------+
| **Market Year     |      | *     |      | **0  |     | **0  | *    |
| Begin**           |      | *07/2 |      | 7/20 |     | 7/20 | MM/Y |
|                   |      | 003** |      | 04** |     | 05** | YYY* |
+-------------------+------+-------+------+------+-----+------+------+
| **Beginning       | 662  | 662   | 540  | 543  | 431 | 403  | *(   |
| Stocks**          |      |       |      |      |     |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Beet Sugar      | 0    | 0     | 0    | 0    | 0   | 0    | *(   |
| Production**      |      |       |      |      |     |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Cane Sugar      | 5090 | 5178  | 5255 | 5388 | 5   | 5200 | *(   |
| Production**      |      |       |      |      | 324 |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **TOTAL Sugar     | 5090 | 5178  | 5255 | 5388 | 5   | 5200 | *(   |
| Production**      |      |       |      |      | 324 |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Raw Imports**   | 3    | 3     | 3    | 3    | 3   | 3    | *(   |
|                   |      |       |      |      |     |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Refined         | 7    | 7     | 7    | 7    | 7   | 7    | *(   |
| Imp.(Raw Val)**   |      |       |      |      |     |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **TOTAL Imports** | 10   | 10    | 10   | 10   | 10  | 10   | *(   |
|                   |      |       |      |      |     |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **TOTAL SUPPLY**  | 5762 | 5850  | 5805 | 5941 | 5   | 5613 | *(   |
|                   |      |       |      |      | 765 |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Raw Exports**   | 3932 | 4017  | 4084 | 4248 | 4   | 4100 | *(   |
|                   |      |       |      |      | 121 |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Refined         | 140  | 140   | 140  | 140  | 140 | 140  | *(   |
| Exp.(Raw Val)**   |      |       |      |      |     |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **TOTAL EXPORTS** | 4072 | 4157  | 4224 | 4388 | 4   | 4240 | *(   |
|                   |      |       |      |      | 261 |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Human Dom.      | 1150 | 1150  | 1150 | 1150 | 1   | 1150 | *(   |
| Consumption**     |      |       |      |      | 150 |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Other           | 0    | 0     | 0    | 0    | 0   | 0    | *(   |
| Disappearance**   |      |       |      |      |     |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Total           | 1150 | 1150  | 1150 | 1150 | 1   | 1150 | *(   |
| Disappearance**   |      |       |      |      | 150 |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **Ending Stocks** | 540  | 543   | 431  | 403  | 354 | 223  | *(   |
|                   |      |       |      |      |     |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+
| **TOTAL           | 5762 | 5850  | 5805 | 5941 | 5   | 5613 | *(   |
| DISTRIBUTION**    |      |       |      |      | 765 |      | 1000 |
|                   |      |       |      |      |     |      | MT)* |
+-------------------+------+-------+------+------+-----+------+------+

+-----------------+------+-------+------+-------+------+-------+------+
| **PSD Table**   |      |       |      |       |      |       |      |
|                 |      |       |      |       |      |       |      |
| Sugar Cane for  |      |       |      |       |      |       |      |
| Centrifugal     |      |       |      |       |      |       |      |
+-----------------+------+-------+------+-------+------+-------+------+
|                 | **20 | *     | **20 | **    | **20 | **    | *    |
|                 | 04** | *Revi | 05** | Estim | 06** | Forec | UOM* |
|                 |      | sed** |      | ate** |      | ast** |      |
+-----------------+------+-------+------+-------+------+-------+------+
|                 | **   | *     | **   | *     | **   | *     |      |
|                 | USDA | *Post | USDA | *Post | USDA | *Post |      |
|                 | Offi | Estim | Offi | Estim | Offi | Estim |      |
|                 | cial | ate** | cial | ate** | cial | ate** |      |
|                 | \    |       | \    |       | \    |       |      |
|                 | [Old | *     | [Old | *     | [Old | *     |      |
|                 | \]** | *\[Ne | \]** | *\[Ne | \]** | *\[Ne |      |
|                 |      | w\]** |      | w\]** |      | w\]** |      |
+-----------------+------+-------+------+-------+------+-------+------+
| **Market Year   |      | *     |      | *     |      | *     | *    |
| Begin**         |      | *07/2 |      | *07/2 |      | *07/2 | MM/Y |
|                 |      | 003** |      | 004** |      | 005** | YYY* |
+-----------------+------+-------+------+-------+------+-------+------+
| **Area          | 0    | 0     | 0    | 0     | 0    | 0     | *(   |
| Planted**       |      |       |      |       |      |       | 1000 |
|                 |      |       |      |       |      |       | HA)* |
+-----------------+------+-------+------+-------+------+-------+------+
| **Area          | 415  | 448   | 420  | 420   | 410  | 410   | *(   |
| Harvested**     |      |       |      |       |      |       | 1000 |
|                 |      |       |      |       |      |       | HA)* |
+-----------------+------+-------+------+-------+------+-------+------+
| **Production**  | 3    | 36884 | 3    | 37483 | 3    | 38000 | *(   |
|                 | 7454 |       | 8246 |       | 8523 |       | 1000 |
|                 |      |       |      |       |      |       | MT)* |
+-----------------+------+-------+------+-------+------+-------+------+
| **TOTAL         | 3    | 36884 | 3    | 37483 | 3    | 38000 | *(   |
| SUPPLY**        | 7454 |       | 8246 |       | 8523 |       | 1000 |
|                 |      |       |      |       |      |       | MT)* |
+-----------------+------+-------+------+-------+------+-------+------+
| **Utilization   | 3    | 36824 | 3    | 37423 | 3    | 37940 | *(   |
| for Sugar**     | 7394 |       | 8186 |       | 8463 |       | 1000 |
|                 |      |       |      |       |      |       | MT)* |
+-----------------+------+-------+------+-------+------+-------+------+
| **Utilizatn for | 60   | 60    | 60   | 60    | 60   | 60    | *(   |
| Alcohol**       |      |       |      |       |      |       | 1000 |
|                 |      |       |      |       |      |       | MT)* |
+-----------------+------+-------+------+-------+------+-------+------+
| **TOTAL         | 3    | 36884 | 3    | 37483 | 3    | 38000 | *(   |
| UTILIZATION**   | 7454 |       | 8246 |       | 8523 |       | 1000 |
|                 |      |       |      |       |      |       | MT)* |
+-----------------+------+-------+------+-------+------+-------+------+

# SECTION THREE: NARRATIVE ON SUPPLY AND DEMAND, POLICY & MARKETING

## Sugar Cane for Centrifugal

### Area (Cut for Crushing)

Sugar cane area is forecast to fall to 410,000 hectares in 2005/06,
unchanged from Post's previous report (# AS 5029) and down 10,000
hectares from the estimate for the previous year. A forecast decline in
sugar prices in 2005/06 is likely to see the Australian sugar industry
remain under continued financial pressure and this is expected to place
downward pressure on sugar area.

Sugar can area harvested in 2004/05 is estimated at 420,000 hectares
unchanged from Post's previous report. This figure remains in line with
the long-term average according to Australian Bureau of Agriculture and
Resource Economics (ABARE) historical data.

Post has revised the 2003/04 figure for planted area upwards sharply to
448,000 hectares. This figure is in line with the recently revised
Australian Bureau of Statistics (ABS) figure and represents an equal
record with the previous year. Post advises that this figure is likely
to remain a record area for the foreseeable future and that current
forecasts likely mark the beginning of a long-term decline in planted
area for the Australian sugar cane industry. Lower prices, urban
encroachment and mill closures are expected to place downward pressure
on sugar cane area for the medium to long term.

![](media/image2.wmf)

*Source: ABARE Data (July-June year)*

### Yield

Sugar cane yield (cut for crushing) in 2005/06 is forecast at 93 MT/ha,
up three percent on the previous year and in-line with the long-term
average. The return to more normal production conditions is expected to
mark the reversal in the trend of declining yields caused by rust
outbreaks and drought experienced in the second half of the last decade.
Estimated cane yield for 2004/05 is 89 MT/ha.

## 

![](media/image3.wmf)

*Source: ABARE Data (July-June year)*

### Cane Production 

Sugarcane production is forecast at 38,000 TMT. Improved yield is
expected to see total cane production increase despite reduced cane
area. This figure assumes average seasonal conditions.

Estimated cane production for 2004/05 is 37,483 TMT, down slightly on
Post's previous report. According to industry reports, persistent dry
conditions in the key growing areas of central Queensland lowered
overall production.

![](media/image4.wmf)

*Source: ABARE Data (July-June year)*

### Sugar Production

Centrifugal sugar production for 2005/06 is forecast at 5,200 TMT, down
slightly from the revised estimate for the previous year. Post has
assumed cane production and a CCS content in line with the long-term
average.

Estimated centrifugal sugar production in 2004/05 has been revised
upward to 5,388 TMT. This figure is in-line with industry data and with
ABARE data using the conversion factor of 1.037 to convert ABARE's
"actual metric tonnes" to the "IPS" equivalent.

![](media/image5.wmf)

*Source: ABARE Data (July-June year)*

### Prices

ABARE's forecast sugar price for 2005/06 is forecast at 9.9 USc/lb, down
on the revised estimate of 10.5 Usc/lb estimated for the previous year.
A general decrease in price is a driving force behind the forecast
decline in cane area.

## Trade

### Exports

Sugar exports for 2005/06 are forecast at 4,240 TMT, down from the
previous year and in line with the forecast fall in production. Forecast
lower production is expected to reduce the availability of sugar for
export. A strong Australian dollar and forecast lower world sugar prices
are also expected to place downward pressure on exports.

Sugar exports for 2004/05 are estimated at 4,388 TMT, revised to reflect
ABARE's most recent report. The increase is partly driven by the
increase in estimated production.

Sugar exports for 2003/04 have been revised upwards slightly in line
with official ABS data. Confidentiality restrictions place a delay on
the reporting of Australian sugar exports. According to ABS data,
Malaysia and Korea received over half of Australia's sugar exports in
2003/04. Japan and Canada were the next largest markets, both receiving
over ten percent of the total.

![](media/image6.wmf)

*Source: ABARE Data (July-June year)*

## Policy

### Free Trade Agreements

Australia implemented Free Trade Agreements (FTA's) with Singapore in
2003 and with Thailand and the United States in 2005. Additional FTAs
have been proposed or are being negotiated with Malaysia, the
Association of Southeast Asian Nations, China and the United Arab
Emirates.

The Australia-US. FTA was implemented on January 1, 2005. Under the
agreement, Australian sugar access to the United States remains
unchanged, with raw cane sugar entering the United States under a
tariff-rate quota (TRQ). The Australian sugar industry strongly objected
to the omission of sugar in the Australian-US. FTA. To compensate the
industry, the Commonwealth Government provided additional funds to the
Sugar Industry Reform Program, a measure which was implemented in 2002.

### Sugar Industry Reform

To address structural and financial difficulties in the Australian sugar
industry, the Commonwealth announced a Sugar Industry Reform Program
(SIRP) in September 2002. Under the SIRP, a total of A\$444 million of
assistance is being provided to the sugar industry over a multiple-year
period.

Under the SIRP, assistance is being provided through a combination of
measures to help the industry through immediate short-term difficulties
and longer-term measures to help the industry undertake necessary
reform. SIRP funding is being used for sustainability grants,
re-establishment grants, and regional and community development
projects.

The Australian Federal Government recently announced A\$73 million
payment to sugar growers and mills as part of the ongoing SIRP program.
This announcement follows the acceptance of regional reforms outlined by
the SIRP.