The cane price you receive is determined by a formula in your cane supply agreement.* This cane price contains a ‘Sugar Price’ component. The Sugar Price is the largest component of your cane price, which means your GEI marketer’s decisions in relation to the Sugar Price are key to your returns.
So what is the ‘Sugar Price’?
It’s a combination of the ICE #11 futures sugar price, and the exchange rate used to determine an Australian dollar price for sugar.
Sugar futures are traded on one of the world’s largest exchanges, known as the ICE 11. The majority of raw sugar pricing is determined from the ICE 11.
Sugar futures prices are typically volatile. For example, between February and June 2017, the ICE #11 futures sugar price went from 20.84 to 14.23 USc/lb—a drop of over 46 per cent in the space of four months. Trends can be hard to predict, with analysts often disagreeing about what’s likely to happen next.
Contracts to price and sell sugar are denominated in US dollars, while growers are paid in Australian dollars—so the other key part of the Sugar Price is foreign currency management, which is equal to the ICE #11 price in its importance to your return.
Like commodities, currency exchange rates are volatile, making foreign exchange management complex.
When considering a GEI marketer, you should consider your marketer’s price risk management strategy and the experience of the pricing personnel in both sugar trading and foreign currency management.
QCS has a clearly articulated and world-class price risk management strategy that aims to reduce the variability of pool outcomes. And our pricing team has a proven track record in sugar and foreign currency, with more than 20 years’ experience in trading and risk management in sugar marketing and banking.
Under the CSPA, your return also includes a Shared Pool element. We’ll talk more about the specifics of the Shared Pool soon.
* as a grower in the Mackay region supplying cane to Mackay Sugar