According to this year's ABARE Outlook forecast, the world indicator price for sugar will drop to US 19.2 cents a pound over the coming year, down from the 20-year highs of US23.1c/lb average in 2009-10 and spot prices recorded last month which reached US26.9c/lb.

But if the forecasts are right, the policy responses from some countries to help ease the pressure on consumers or help farmers capitalise on the prices will be behind a fall in coming months.

Early this year, Brazil reduced its mandatory blend of ethanol (produced from sugar-cane) from 25 to 20 per cent until the middle of this month to help reduce the upward pressure on prices to Brazilian consumers while enabling sugar can mills to benefit from the better prices.

In the European Union, there are plans to increase the limit on sugar exports by 500 kilotonnes to meet its export subsidy volume limit of 1.37 million tonnes.

Indian farmers will be paid more money to produce sugar in the coming year following a production shortfall, and sugar import duties up to seven million tonnes have been removed.

These reactions won't dent returns for Australian farmers too much over the coming year, with favourable returns still expected despite the strength of the Australian dollar.

The season pool offered by Queensland Sugar Limited (QSL) in February for the 2009-10 harvest was $504-$514 a tonne, compared with $335/t the year before.

The gross value of Australian sugar production in 2009-2010 should hit around $1.5 billion – 50 per cent higher than 2008-09.

Over the medium-term though, the forecast for the world sugar indicator price is that it will decline from these amazing highs as world carryover stocks of grain start to recover.