Any bank tempted to extend more credit to cane growers on the back of the
rising sugar price will be reassessing the geographic concentration of their
loans in light of the impact of Cyclone Larry on far north Queensland

And the credit quality of most of Australia’s banana growers will also have
taken a battering from the storm that made landfall near Innisfail, south of
Cairns, before daylight yesterday.

Growcom, the industry association that represents fruit and vegetable growers
in Queensland, said crop insurance was almost impossible to obtain, and, to the
extent insurers did offer this product, was too expensive to make it

Estimates of damage to crops from Cyclone Larry are uncertain, though one
member of parliament for the region, Bob Katter, told Queensland media that up
to 90% of banana crops might have been ruined by the storm.

In turn, the affected region of far north Queensland produces up to 90%
of Australia’s banana crop, worth around $350 million in annual

Wesfarmers Federation Insurance used to be active in marketing crop insurance
in the early 1990s in Queensland, though few farmers are likely to have
maintained any cover through WFI.

Ron Mullins, deputy general manager of Canegrowers, which represents most
sugar cane farmers in Queensland, said there was extensive crop damage in the
growing region between Cairns and Tully. Mullins said this region produced
between 20% and 25% of the sugar output of Queensland.

Mullins said that for cane growers, as with other farmers, insurance against
cyclone damage was unobtainable. Mullins said early reports suggested there was
extensive damage to buildings, though he could not be specific.

The Insurance Disaster Response Organisation and the Insurance Council of
Australia last night were still to compile estimates of damage and the scope of
any insurance losses.

Tourism operators and other businesses are more likely to have adequate
insurance cover for damage to buildings, though this will depend on whether or
not the damage is said to be caused by the action of the sea, which, as with
floods, is not covered by standard insurance policies in Australia.

IDRO Queensland Coordinator, Graham Jones, said it was too early to put an
estimate on insured losses at this stage.

Sugar represented eight per cent of Suncorp’s agribusiness receivables at
June 2005, or around $210 million in loans, equal to about 0.6% of the
financier’s loan portfolio.

Suncorp was less specific about its sugar loans in its December 2005
financial report, other than to observe that impaired assets within the
agribusiness segment halved to $17 million between December 2004 and December
2005, mainly due to improved trading conditions within the sugar industry. That
trend was no doubt reversed by yesterday’s storm.

Of the major banks, National Australia Bank’s above average market share in
Queensland and an above average market share in agribusiness may suggest that
NAB is the most exposed of the major banks.

Several banks engaged in routine natural disaster public relations yesterday,
with ANZ Bank, for example, undertaking to suspend interest payments for
affected customers by three months.