Floods in Australia: what legal implications for Commodity Traders?


Australia has endured one of the wettest spring seasons in its recorded history. Heavy rain in November and December in eastern Australia caused river levels to rise and flood plains to become saturated. This led to widespread localised flooding and to the severe floods reported by the global media over the New Year period.

The most severely affected area covers a wide swathe of the middle part of Queensland State. At least seven major rivers in the area are reported to have flooded. At the time of writing the water levels are still high; states of emergency are in effect across many local authorities in the affected area. Water levels are expected to recede in the coming days but not to return to normal levels for weeks to come.

Affected commodities

Beyond the damage to life, property and infrastructure, the severe rain has impacted Australia's important commodities exporting business. Wheat and sugar trades are amongst those affected. Damage to crops and inland transportation problems have lead to fewer stocks being available for export and a consequential rise in market prices. US Wheat futures were reported to be trading at a five-month high this week following concerns about damage to Australian (the world's fourth largest wheat exporter) crops. Australian sugar export forecasts for this year are reported to have been cut by 25%, exacerbating demand pressure and contributing to raw sugar prices reaching a 30 year high. Conversely, dry bulk freight prices have been forced down by the reduction in cargoes available for seaborne carriage. The Baltic Exchange's dry bulk freight index reached a 20 month low this week.

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