Rising global prices for raw sugar unlikely to hit consumers From: The Australian January 23, 2010 12:00AM
SURGING global prices for raw sugar are unlikely to hit the hip pocket of buyers of retail products that use the sweetener, and so will probably not push up inflation, according to lobby group Canegrowers.
Suggestions that consumers would feel pain at the supermarket as a result of higher sugar prices were just plain silly, and recent alarmist reports needed to be tempered with reality, Canegrowers chief executive Ian Ballantyne said.
Australia produces around 4.5 million tonnes of raw sugar a year, of which about one million tonnes is consumed by the domestic market. The rest is exported.
All raw sugar is priced and sold in US dollars and the international price has nearly doubled during the past two years, to about US29c a pound. Raw sugar is sold to refiners, which in turn supply supermarkets, manufacturers and food processors.
The price rises, which sparked a 25 per cent rise in the wholesale price of refined sugar by CSR, have led to media speculation about a knock-on effect on prices for products containing sugar.
Australians consume around 45 kilograms per capita of sugar a year in packaged form, in beverages and in foods --about average for developed economies.
At current high prices, this means the average Australian consumes only around $25 worth of raw sugar a year.
Only about 15 per cent of sugar sold in Australia is sold as sugar in supermarkets, so the rise in the raw sugar price, passed on to the retail refined product, should cost the average consumer little more than $2 a year, or less than 5c a week.
By comparison, there is about 2.4c worth of raw sugar in a can of soft drink and about the same in a can of baked beans.
"Even a 25 per cent increase in the sugar price is unlikely to cause a price explosion unless some manufacturers inappropriately used the sugar price increase as a trigger for much larger increases," Mr Ballantyne said.
Global raw sugar prices are at 30-year highs because of a global production slump and strong consumption growth.
This follows a number of years of unprofitably low prices and crop losses through drought, flood and disease.
Mr Ballantyne said Australian cane farmers would use the extra income from higher prices to fund machinery and farm upgrades in preparation for expected lower prices in future.
Raw sugar sales are expected to generate close to $US2.5 billion this year, with more than 70 per cent coming from exports.
Australia is an important regional sugar supplier, with most exports destined for nations in Asia and the Middle East.
