Add a reduction in beet production in Europe and you have an estimated 11pc increase in sugar price to US13c a pound for this current financial year, according to ABARE.

The strength in this price has surprised the economists as it comes despite a 17pc increase in global production this year.

Importantly, the price is expected to average US12.1c for the upcoming 2008-09 year, but just how much of these historically higher prices will be passed onto growers depends on the Australian dollar.

Whatever the case, ABARE has forecast the sugar price to remain above US10c pound out to 2012-13.

The medium-term, or five-year, outlook for sugar is highly reliant on the biggest producer, Brazil, a country that is forecast to increase its production by 20pc within the same period.

As a low-cost and expanding producer, Brazil is sugar’s whip hand and despite the global expectation for biofuels, the South American giant is forecast to drive global prices down to US11c/lb over the next four to five years.

Ethanol production in Brazil is expected to rise by 35pc by 2012-13 and the proportion of cane used for ethanol is set to drop from 47pc now to 40pc across that time frame.

Australian growers are enjoying better seasonal conditions and the raw sugar harvest is predicted to rise by 3pc this year, to 4.85 million tonnes.

With irrigation dams and underground water resources topped up, production looks somewhat assured into the short term at least.

SOURCE: Extract from ABARE Outlook report, to be published in Rural Press agricultural weeklies, March 6.