The Australian sugar industry is now a deregulated market, however it does not operate as openly or transparently as say grains or cotton. Growers have cane supply agreements with their local mill and these Milling groups either market some or all of their production themselves or through commercial arrangements with Queensland Sugar Limited.
While pricing differs between milling groups, grower suppliers in most cases can access the ability to price a significant portion of their production. The sugar market is relatively sophisticated in terms of the facilities and products available to manage price risk.
So how is Australian sugar priced?
Over 95% of Australian sugar produced is priced against, or with reference to, the Intercontinental Commodity Exchange (ICE) No.11 Sugar futures contract (a US based contract). This means that the No.11 contract heavily influences the final returns producers and millers receive along with movements in the Australian Dollar and premiums. Gaining an understanding of how the market works and its underlying price drivers is extremely important in your marketing decision making process.
Farmarco has been providing marketing and price risk management services to grain growers since 1985; cotton growers since 1990; and sugar growers and millers since 2007 and continues to be one of the leading independent advisory firms. Farmarco’s services in sugar range from publications and pools (in some regions) to client advisory for millers and growers.
There are any number of reasons that sugarcane growers, millers and consumers (buyers) use Farmarco however some of the common ones are:
Farmarco produces a weekly publication which looks at the ICE No.11 futures, and currency markets and provides an outlook on the markets that will assist you in keeping abreast of where the market is, what is driving the market and why and where we think it is headed.
Farmarco advisers a number of sugarcane growers and sugar millers in the management of their price risk. This advice can include when to price, how much to price, what marketing alternatives to use and the overall management of the marketing program. Using at times a combination of Long Term Target Pricing, SWAPS, basis contracts, futures and options Farmarco supports the producer/miller and consumer in achieving profit objectives and managing price risk a number of years into the future.
Farmarco, from time to time, manages sugar pools over several growing seasons.
Good marketing is about obtaining consistently high levels of profitability year in and year out.
Contact Farmarco to discuss which of the Sugar Commodity service options might suit you.
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