Sugar, milk industries dominant in 2017

sugarThe sugar, milk and grain industries are seen to stand out in 2017, according to recent research by IBISWorld. Although, the milk and grain sectors may have to adjust in accordance to new commercial situations or limit their expectations for growth.

“Many of the industries likely to disappoint this year have performed strongly in recent years, but research suggests boom times for these industries are over, at least for the next 12 months,” said IBISWorld senior industry analyst Nathan Cloutman.

“Some of the industries that IBISWorld anticipates will grow over 2017 have remained depressed for some years, giving rise to demand for those industries’ products and services.”

Industries set to fly in 2017

Industry Revenue 2016-17 ($ millions) Revenue growth 2016-17 %
Road and Bridge Construction 20,096.2 27.2
Sugar Manufacturing 3,007.8 19.9
Oil and Gas Extraction 38,032.1 16.8
Data Storage Services 2,073.6 14.4
Child Care Services 12,400.0 12.0

Industries set to fall in 2017

Industry Revenue 2016-17 ($ millions) Revenue growth 2016-17 %
Heavy Industry andOther Non-Building Construction 37,800.0 -38.1
Multi-Unit Apartment andTownhouse Construction 19,344.6 -26.0
Milk Powder Manufacturing 757.0 -12.2
Mineral Exploration 1,257.0 -7.6
Grain Growing 13,314.7 -5.5

Revenue for the sugar manufacturing industry is forecast to jump 19.9 per cent during 2016-17 to reach $3 billion. Local sugar production is forecast to rise 3.7 per cent during 2017, because of an expected increase in planted area for sugar cane. Increased production typically places downward pressure on prices. However, the sugar industry’s reliance on export markets (which account for about three-quarters of the industry’s revenue) means that local prices tend to follow global sugar prices.

“The world sugar price indicator is projected to increase 20.1 per c during 2016 [to 2017]. This is because global sugar consumption is expected to exceed global sugar production for the second year in a row, reducing world sugar stocks for the second year running. As the world sugar price indicator is expressed in US dollar terms, the projected depreciation of the Australian dollar during 2016 [to 2017] is expected to increase the world price of sugar (in AUD terms) even further during the year, boosting returns for local sugar manufacturers,” added Cloutman.

Meanwhile, milk production revenue is forecast to fall 12.2 per cent during 2016 to 2017 to $757 million. This follows on from declines of 35.8 per cent and 22.2 per cent in 2014 to 2015 and 2015 to 2016.

“The milk powder manufacturing industry heavily relies on export markets, which account for approximately 90 percent of industry revenue. Consequently, fluctuations in global milk powder prices play a major role in the industry’s performance. Global milk powder prices collapsed during [2014 to 2015] amid concerns about excessive increases in milk powder supplies,” said Cloutman.

Prices did not recover during 2015 to 2016 and are expected to only make a minor recovery during 2016 to 2017. Furthermore, local producers are anticipated to reduce milk powder production during 2016 to 2017, with low prices discouraging production. These factors will likely depress industry revenue during 2016 to 17.

Revenue for the grain growing industry is forecast to fall 5.5 per cent during 2016 to 2017 to $13.3 billion. Local prices of key grains barley and wheat are forecast to fall 25.8 per cent and 15.6 per cent, respectively, during the year. This is because of the falling global prices, with the world wheat indicator price expected to decrease 13.8 per cent in 2016 to 2017.

“Record world stocks of many grains, caused by favourable growing conditions in many key grain producing countries (such as Canada and Russia) have created excess global supply — which is likely to place sharp downward pressure on grain prices during the year,” said Cloutman.

 

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