Double trouble for Queensland commodity exports
Queensland’s top export industries could take months to recover from the impact January’s extensive flooding and February’s Cyclone Yasi. The coal sector, sugar cane and banana industries have all taken a hit, and commodity experts predict the damage will be more than a billion dollars.
North of Townsville 50 percent of sugar cane crops have been destroyed, amounting to a sixth of total Australian production. Canegrowers chief executive Steve Greenwood says the crop has been heavily damaged. “Plus there is significant water damage and flooding that has resulted from the cyclone,” he said. “We think the impact on the crop has confirmed our earlier predictions of a more than $500 million hit.”
Greenwood believes the sugar cane industry will take up to three years to return to its normal production cycle. Currently over 80 percent of Australia’s annual 4.4 million tonnes of sugar production is exported. That figure is expected to drop in the wake of the cyclone, with sugar exports below 2.5 million tonnes this year.
Commonwealth Bank commodity strategist Luke Mathews says the severe weather has been disastrous for banana producers also. “It has been a very tough couple of months for the Australian agricultural sector,” he said.
He warned consumers to expect price rises in the region of the 500 percent inflation experienced after Cyclone Larry. “It is plausible to expect a significant increase in the price of bananas this time around, particularly considering Yasi was more intense and a geographically larger storm than Larry was,” he said. “The production cycles that exist in agriculture mean it is very difficult to turn these things around overnight.”
Queensland’s coal industry has also been adversely affected, with some plants halting production to clean up flood damage and pump water out of open mines. Three major coal miners will be affected by the destruction of a freight rail line in the Toowoomba region, which may not be repaired until the end of April. Spot coal prices have already risen and experts predict contract prices will also increase, since the 2011 floods have been more damaging than the January 2008 floods when coal prices tripled to reach $300 a tonne.
The state government has forecast losses of up to 15 million tonnes of production, a figure which the Queensland Resources Council believes is a gross underestimate. “We are still of the view that we have lost in the order of 30 million tonnes of production, which is $400 million of royalties over the next few months that the state cannot afford to lose, given the extent of the rebuilding task that is ahead,” a council spokesperson said.