Context needed for growers to make fair comparisons and decisions on their future

qsl18 June 2014

Wilmar’s recent claims about sugar prices achieved should be clarified and more details disclosed so that growers can make fair comparisons and decisions on their future, QSL CEO, Greg Beashel, said today.

Mr Beashel was commenting on recent claims by Wilmar that the raw sugar price it achieved would have amounted to an average payment to growers of more than $4.00 per tonne of cane in the 2012 and 2013 seasons above what they received.

Mr Beashel said Wilmar should provide context on how these figures were achieved so that growers could understand the type of pricing risk profile and pricing timelines Wilmar applied.

“Sugar pricing is highly complex and there are a variety of options available in our system that result in a wide range of prices being achieved by individual growers and mills. Some individuals in our system have achieved higher price outcomes than Wilmar claims to have achieved. These results can all be achieved within the existing system,” Mr Beashel said.

“QSL has achieved a range of results in individual pricing pools, for example the Guaranteed Floor Pool last season, achieved a price of $70.72 per tonne of sugar above the market benchmark. The weighted average result of all our pools last season was more than $20.00 per tonne ahead of the market benchmark.”

Mr Beashel said QSL offered a range of pricing options tailored to different risk levels, including the ability to forward price, to participate in one of QSL’s pricing pools or for a miller to set up their own pricing pool using QSL’s books. If a pricing option doesn’t exist, millers are able to talk to QSL and set up their own pricing option through QSL.

“Our question still remains to Wilmar: why not allow growers the option to access a pricing pool run by Wilmar through the QSL system? Why haven’t they offered this to-date?” Mr Beashel said.

Mr Beashel urged growers to consider that pricing decisions involve close consideration of risk.

“Each grower and miller has different risk appetites. Like superannuation funds, the higher the risk in sugar marketing pools, the greater the potential for higher returns. However, higher risk also means greater potential for loss when conditions are less favourable, as has also been seen with superannuation,” Mr Beashel said.

Mr Beashel said growers want a choice over who markets their sugar.

“At the heart of this issue are the principles of value, risk, trust and transparency. Price is one aspect of the value proposition and should not be considered in isolation. Pricing is one of the four pillars of our industry system, along with financing, marketing (selling) and bulk storage, handling and shipping.”

“Wilmar is basically saying ‘trust me’ to growers and offering them no choice of marketer. The question remains, if Wilmar is confident of achieving higher prices, why doesn’t it listen to its growers and provide them with the option of who markets their sugar – QSL or Wilmar?”

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