Australia's A$2 billion ($1.5 billion) raw sugar export industry is reeling from a double whammy of a shrinking harvest caused by torrential rain and a government refusal to finance a fight against smut disease.
Rain is the immediate threat and is expected to slash national raw sugar production by 10 percent, Ian Ballantyne, general manager of Canegrowers, the main growers' lobby, told Reuters on Thursday.
"Everywhere else in the country is in drought and we're getting too much rain," he said.
Australia's main sugar cane fields stretch along 2,000 kilometres (1,243 miles) of tropical coastline in Queensland State.
Australia is the third-largest raw sugar exporter in the world, after Brazil and Thailand, and sells throughout Asia. Sugar output would be much lower than the 4.8 million tonnes forecast by the Australian Bureau of Agricultural and Resource Economics, Ballantyne said.
Production could be down 10 percent or more on last year's output of 5.1 million tonnes, he said. This would indicate a crop of around 4.6 million tonnes at best the smallest in more than 10 years.
"The harvest is going slowly poorly," Ballantyne said.
Very wet weather in far-north Queensland would cause a late finish to the harvesting and crushing season in mid-December, as well as a substantial reduction in sugar content, he said.
This comes on the heels of worsening crop damage caused by Cyclone Larry in March. The country's raw sugar output has been generally above 5 million tonnes over the past decade, peaking at 5.6 million tonnes in 1997/98.
The last time it dipped below 4.9 million tonnes was in 1993/94, when output was 4.2 million tonnes.
The longer-term threat to Australian sugar is smut, a contagious fungal disease first discovered in the eastern canefields in mid-June.
Typically, smut has limited production effects in its first year, but it can have a bigger impact from the year two as it progressively stunts plants, reducing their yields and impeding re-growth.
Smut poses no threat to human health and harvesting is continuing under strict guidelines.
The industry had shown that it could contain the disease and eradicate its commercial impact, he said.
Smut had been contained to 50 farms in the Bundaberg/Children area, 250 km (155 miles) north of Brisbane, he said.
But the federal government said that since the industry could not totally eliminate smut, it did not qualify for funding.
The Queensland government and the sugar industry would finance A$25-A$28 million of the total amount sought, he said.
"It's a tough life and we'll get on with it. The cost of letting this spread throughout the industry unchecked is many hundreds of millions of dollars."