Australian cyclone risks to commodities trade

Wed Feb 2, 2011 2:34am EST
SYDNEY (Reuters) - A massive cyclone due to slam into Australia's northeast coast on Wednesday could prove costly for major producers of commodities such as sugar, coal, nickel, copper and gold.
Cyclone Yasi, now closing in on the central coast of Queensland state, is forecast to generate winds of up to around 300 kph (180 mph) by the time it comes ashore late on Wednesday.
Here are the main risks to commodity markets.
SUGAR
The cyclone threatens to flatten sugar cane in an area accounting for roughly a third of Queensland state's production, which in turn makes up more than 90 percent of national sugar production.
Crop damage could further pressure world raw-sugar prices, already at three-decade highs.
Australia ranks among the top-three raw-sugar exporters alongside Brazil and Thailand, shipping more than 3.0 million metric tons in a normal year, or about 10 percent of the world export market.
In 2006, a weaker cyclone, named Larry, slashed national raw sugar output by almost 8 percent to 4.7 million metric tons.
The abnormally wet start to the Australian summer this year caused the country's worst harvest in 20 years.
Raw sugar exports for 2010/11 are forecast to fall to around 2.4 million metric tons from the previous 3.2 million metric tons, after recent heavy rains and floods cut sugar content, says leading sugar exporter Queensland Sugar Ltd.
Queensland-based Cane growers Association had hoped for a modest recovery in sugarcane production to around 29 million metric tons in 2011/12 from 27.3 million metric tons in 2010/11.
A normal harvest is around 33 million metric tons.
Harvesting usually starts mid-year and can finish as late as December. The current crop threatened by Yasi is in its early growing phase.
Global sugar supply will just cover demand this year and prices will fall by end-2011, a Reuters poll in January showed, although that fine balance could easily be upset by dire weather or logjams at ports in Brazil, the world's top sugar producer.
Also in the path of the cyclone are the two biggest Australian sugar ports: Mackay, which can handle 3 million metric tons a year, and Townsville (2 million metric tons).
COTTON & GRAINS
About five million tonnes was left uncut because of rain disruption and is most at risk being smashed by the cyclone because it is standing taller than the new 2011 crop.
COAL MINES, GRAZIERS ON ALERT
Yasi, one of the world's most powerful cyclones, is so large that it is expected to travel as far inland as the Mt Isa mining region, about 1,000 km inland, before finally breaking up.
Xstrata said it was bracing for high winds at its Mount Isa Copper mining and smelting unit and also at its Ernest Henry copper mining operations even further inland.
Most of Queensland's coal mines lie south of the cyclone's predicted march west across the state, but the northerly mines, such as Rio Tinto's Hail Creek mine and Xstrata Coal's Collinsville mine, have been closed. Xstrata was considering shutting its Newlands mine as well.
The Pajingo gold mine, south of the historic gold mining town of Charters Towers and yielding around 2,200 ounces a month, is well within the forecast path of Yasi, and the owner said on Wednesday that work had been suspended.
Queensland state's large livestock industry also prepared on Wednesday for heavy loses from Cyclone Yasi.
Australia's National Farmers Federation estimates that the cyclone could affect a fifth of Queensland's A$3.3 billion ($3.34 billion) herd if it barrels through prime grazing areas.
Queensland, with about 12 million head of cattle, accounts for about 44 percent of the national herd.
Australia's banana growers also face major losses, with the crop now in full swing. In 2006, local banana prices quadrupled after Cyclone Larry destroyed 80 percent of the national crop.
"Losses will likely be catastrophic again," the National Farmers Federation said in an email to Reuters. ($1 = 0.988 Australian Dollars)
(Additional reporting by Rebekah Kebede in PERTH and Lewa Pardomuan in SINGAPORE; Editing by Mark Bendeich, Yoko Nishikawa and Sanjeev Miglani, sourced :Reuters)