CANEGROWERS Around the Paddock
CANEGROWERS advocates on behalf of sugarcane growers in Australia. This podcast series examines some key issues and challenges and celebrates the successes.
CANEGROWERS Around the Paddock
Talking Trade: From Surplus to Strategy: Making Sense of a Softer Sugar Market
Prices are soft, tanks are full, and the sugar market is asking a hard question: how do you protect margin when the prompt is at life‑of‑contract lows but the future looks better? We dig into the turn from a multi‑year deficit to a sizeable surplus and show why the forward curve is your best signal right now. You’ll hear a clear breakdown of Brazil’s production mix, why mills kept maximising sugar over ethanol, and when that balance might finally shift. We also unpack Thailand’s rebound, India’s fixed cane pricing and likely export subsidies, and what those flows mean for raw premiums and shared pool values across Asia.
Zooming out, we connect the macro dots that matter: cheaper oil, policy‑driven trade volatility, and the tug‑of‑war in currencies with the Aussie dollar and Brazilian real. Then we bring it back to the paddock with practical steps to manage price risk. If you’ve been waiting for certainty before locking prices, this conversation makes the case for a different approach: anchor decisions to your cost of production, use layered targets, and treat the forward curve as a tool to move profit out of a noisy present and into a steadier future.
We close with a simple framework you can apply this week. Map volumes by season, set trigger levels that clear your margin needs, and pre‑commit to execution so you’re not forced to price at the worst time. The prompt may sting, but deferred seasons still offer room to build resilience. If this helped clarify your plan, follow the show, share it with a grower who needs a pricing reset, and leave a review with your top takeaway so we can dig deeper next time.
Hello and welcome to the Market Information Service Update for November 2025. This is Dougle Lodge here to give us a quick update on the world sugar market. I'm joined here by Doug Morrow. Good to have you here again, Doug. And as Doug and I were just reflecting earlier, I think it's about 25 to 30 years we've been doing this sort of stuff now, Doug?
SPEAKER_00:Yes, it's it's too long now. Um but yeah, it's good to be back in the cane growers' office. And yeah, thanks for inviting me to join for this for this month's version.
SPEAKER_01:And I think we have quite a lot to talk about, Doug. It's been uh a lot of movement in the sugar market and the Australian sugar prices overall over the last few months since we last did a focused discussion on the sugar market. So it'd be interesting to sort of do a bit of a round the grounds and we'll go through what's been happening and what we think might be coming up as well.
SPEAKER_00:Yeah, thanks, Dougal. Um I guess it's a good way to start with you know agricultural cycles again and and and you know where we've come from over the last couple of seasons, probably as many as five seasons, where the market's generally been um in deficit and prices have been tracking generally higher, all the way to all-time highs in Aussie per ton terms, you know, about 18 months ago. Um, you know, and I think we've spoken about that as a as a as a team before, and you know, generally in that situation when prices are high, that's the best encouragement for for growers themselves to increase production. So generally, you know, what we see is high prices leading to low prices, and that you know, that's generally the agricultural cycle and and where we are now. So we've moved out of a deficit situation into uh a pretty large surplus. And you know, that looks here to stay, certainly for this season as we start to look into the next couple. Production estimates are getting larger at this point, not smaller.
SPEAKER_01:And I think we've seen that reflected in the the with the curve, I suppose the the for the forward curve of the prices. I mean, 25 season is now the lowest price uh across the the you know the three, four-year horizon, um, about four seventy dollars a ton now, which is uh the lowest it's been in the last three years. So again, um not a great situation to be at you know life of contract lows. But I suppose the good news is there, Doug, you know, that's the low point. If you look out that horizon, we do see prices increasing uh season by season, going from like 475 um in 28 season to five over 500 in uh 27, 520 in 28 season, and 540 in the 29 season. So we see that you know basically that it's a short-term situation, as we we usually talk about where we see surpluses. It's actually the right here, right now, where the market's trying to do the the heavy lifting uh to move that surplus of the sugar.
SPEAKER_00:Yeah, that's right, Dougle. And I think what we're seeing there with those price differentials between the nearby seasons and the deferred is that uh you know the the market is trying to encourage the owners of that sugar in the prompt positions to carry that forward to to the future positions and pay for the storage of that. Because generally what's happening now is if you can't store that sugar, you need to sell it. And and and that's what's driving those prices down in in the short term as people are forced to move stock that you know generally there are more sellers than buyers. And in that circumstance, you're right, the prices are generally under pressure.
SPEAKER_01:And there's a couple of reasons, I think, Doug, why we've sort of wound up where we have. I mean, we talked about supply and demand, um, and there's a s as a surplus is the current um outlook. Um usually surpluses are driven by increased production. And I think we sort of talked about those high prices that were there. High prices stimulate extra production. And if you do around the grounds, I mean Brazil, what we're sitting on sort of max sugar percentages, yeah, the highest ever, I think, in terms of percent of sh of allocation to sugar.
SPEAKER_00:Yeah, yeah, that's correct. So the the the Brazilian mills, as we know, have the ability to switch production between cane and sugar, um cane and ethanol, I'm sorry. Um and at the moment, sugar, even though prices are certainly the lowest levels that they've been in the last few years, the Brazilian mills continue to focus on and maximize the production of sugar at the expense of ethanol. So in that in that circumstance, the prices are still haven't done enough on the downside to encourage those mills to switch their production to ethanol, which could provide some relief in the short term. But you know, from what we're seeing from the latest Unique results and the production reports coming out of Brazil, it's not happening yet. So the prices, even though we're down around that 14 cent mark in the prompt positions, it the prices still haven't moved low enough to shift the needle there of those of those production percentages in Brazil. So it there's there's not a good lot of good news there in terms of what the Brazilians are doing to alleviate that surplus.
SPEAKER_01:I think that's probably because we're like 90% through the current crop. So we're sort of approaching the end of the season. They've already locked in some of their supply chain arrangements for the sugar as opposed to ethanol. But I think what we we we did note, I think, was we're now at 14 cents for sugar, whereas the ethanol is now about 17, 16, 17 cents, I think, isn't it, Doug? So this is the first time in two years, three years, I think, that we've actually seen sugar prices lower than ethanol, or the opposite ethanol prices being higher than sugar. So what that's probably gonna point to is higher ethanol in 26 season, I'd imagine, coming through in terms of the production mix for next year.
SPEAKER_00:Yes, yeah, and that's absolutely correct, Dougle. And you know, the unfortunate thing for prices in the short term is that that impact's not really gonna be felt until, you know, out into May and and and June and July, August into the peak crop of the next Brazilian cycle. So that relief from a change in production mix is still some way in the future and is not probably going to drive prices higher in the short term. It does potentially provide some relief next year, but not now.
SPEAKER_01:I think just looking at that 14 cent level, I mean, typically we talk about that's probably at or below the cost of production in Brazil too, I think, wouldn't it? There's not many sugar producers in Brazil that'll be making money at 14 cents a pound, I wouldn't have thought.
SPEAKER_00:I think globally now and and in the last few seasons, we've seen those costs of production going higher, not just in our own backyard, but certainly globally. And I think absolutely we are approaching these levels now where prices are at or below costs of production in many producing countries. But we've seen that before Dougal where because of the return cycle and the nature of the cane crop, the cane is already in the ground and it probably has been added to the production in the last couple of seasons and has probably got a few cycles left it in terms of returns before you know different crop decisions can be made. So whilst you know that is a a good long-term supportive factor for sugar prices generally, because of what we know about, you know, cane and the way growers manage their their crop and the number of cycles, it it's it's again probably a long-term benefit as opposed to short-term relief for prices.
SPEAKER_01:Yeah, I suppose that's when you're looking at the other major producers too, what Thailand, they're now looking at about 100 million tons of cane for the next uh season, which is starting now, uh, which is big recovery for them. I think 12 million tons of sugar versus about 10 million tonnes of sugar. So seeing extra sugar coming on uh from the Tais. And then I think India, we've also seen um extra production coming on there as well, and now a likelihood of exports coming through. So we're sort of getting a a triple whammy from Brazil and Thailand and India, which are the other third major exporters onto the world market, aren't we?
SPEAKER_00:Yeah, certainly the the the Thai's exporting that additional two million tonnes of sugar into the you know the Asian region is going to have a negative impact on those Thai physical uh the the you know raw sugar um physical premiums in the in the region. Generally not good news for shared pool values in that environment. Um India India is i is a far more unique situation. And I think we've spoken about this before where cane prices don't float with the market, they're set by the government. The government tends to have an agenda with regards to propping up cane prices. And I think if we've look back over the last five or even ten years, cane prices year on year tend to go up regardless of what sugar prices are doing. And that distorts the incentive for growers. Yeah. It does.
SPEAKER_01:Yeah, I did some number crunching on the latest uh cane price, and it's uh equivalent to$75 Aussie dollars per ton of cane in India at the moment is what it is for this coming season. So that's pretty high, right? That's a that's a good return for a grower.
SPEAKER_00:It's it's a great return for a grower, but that the industry creates their own issues now where sugar prices and and the mills can't buy cane for$75 and sell sugar at the cost of production. So, you know, what's going to happen there? I mean, my guess is that as in the past, we're gonna see cane arrears getting built. So whilst it's a great theoretical sale price at$75 a ton, I mean the if the mills can't turn a profit, the person that they turn to to not pay first are the growers. So I think that, you know, I think if I was to look forward, you know, at these type of cane prices in India and the current sugar prices available to the Indian mills, my fear is that we are again going to start building up significant cane arrears there in India. So what the government does about that, we don't know yet. I think you were actually telling me about potential subsidies again. What what are you hearing on that?
SPEAKER_01:Yeah, I think that was a bit of news that came out over the weekend that um, like yeah, as he's saying, because the high cane prices are already fixed by the government and uh we know the world sugar price is you know 14-15 cents, it's actually uh well below their cost of production to be exporting sugar, but we now have a surplus of sugar in the Indian domestic market, which they you know can't consume at all locally. So uh it se it seems yeah fairly inevitable they're gonna be you know lobbying for the ability to export in the first place, they're probably also looking for some sort of subsidy again. So I think that we're back in that dreaded situation where we're gonna be held hostage to the Indian politics and uh news of any subsidies will obviously be not very positive for the world sugar price, unfortunately.
SPEAKER_00:Look, I I I a hundred percent agree. And and if you know, if if those exports are subsidized, they're subsidized at any price. So it it it um it's not great news for the prompt price in in sugar, to be perfectly honest, if they push ahead with that subsidy. I I know in the past that some of those programs, those Indian export subsidized export programs have been challenged, but uh um I don't certainly don't see any challenge being able to stop the implementation of this in the short term. So not great news for sugar prices.
SPEAKER_01:Yeah. I think that's where I know Cane Growers has done quite a lot of work uh with the Global Sugar Alliance to lobby against the subsidies, so I'm sure we'll probably see a bit more activity to try and avoid that situation again because we're certainly back in the you know the situation where it it we is a likely outcome that the millers in India will be lobbying their government for support. I would think. And part of the reason for that, I think, is um the uh the ethanol production in India, which they've typically used you know, sugar stocks to create the ethanol. I think we saw recently that that um plan has been sort of um reduced in favor of uh ethanol being made by corn. So that means there's actually more sugar available than what some of the analysts previously thought as well. So net net looks like shit India is going to have sugar available for export, you know, which is gonna be yeah, again, a negative um sort of bit of a dark cloud home hanging over the market for a little while until until the rest of the market can sort of deal with that surplus. So, Doug, just thinking about the the macroeconomic environment, you know, there's obviously been quite a lot of changes. And you know, look back to the start of the year, I think we were looking at um oil prices are you know around$75 a barrel back then. Uh today we're at sixty bucks a barrel. Quite a lot of geopolitical volatility out there on which is probably leading to you know oil price movements. I think there's certainly the low end of the cycle, I would I would imagine, is probably where we are at the moment.
SPEAKER_00:It's hard to make a case for oil moving lower than current, isn't it? I think the overlying thing that has been so unpredictable well, for this calendar year anyway, is is the U.S. trade policy. Um I think most people who read a newspaper have probably woken up each Monday morning to a to a new policy from the U.S. Administration, most of which are very protectionist for the U.S. and involve import tariffs. Um the Trump administration continues to try and convince their constituents that that's a tax on foreign countries, but it's simply a a tax on the American consumer and drives inflation. So, you know, in that environment, nothing, no financial instruments have been performing exceptionally well. It's it's it's very uncertain, has led to all sorts of volatility, um uh and that doesn't seem to be going away. So that overly overlaying uncertainty, I think, continues for the life of the Trump uh administration. So I think um you know we all need to get used to that uncertainty. But uh let's bring it back closer to home a little bit because you know Australia and the Australian economy has certainly been a victim, you know, of that you know constrictive trade policy. You know, we are an export-focused nation. Our biggest trading partner is China. We we're very much focused on the growth of Asia as a customer of ours. And in that environment, you know, ex our exports have been questionable. Um and what we're seeing is generally cost increases globally, Australia's inflation is back above the RBA's target. We've been in an interest rate uh uh uh you know reduction cycle. And just uh I think it was Melbourne Cup Day, you know, the latest inflation uh numbers have come out again above the RBA's target, and that really calls into question any further interest rate relief. And if anything, you know, uh in the current environment, perhaps the next direction for Aussie interest rates is higher. Um and and and if that's actually true, that's actually gonna push uh the Aussie dollar higher as well in the medium term. So, you know, we really need to watch that inflation data again now to see what the RBA is going to do. But it's a it's a real risk for the Aussie dollar that's been relatively stable in the mid-sixties for quite some time, you know, that if if interest rates go up again, we could see a higher Aussie dollar value.
SPEAKER_01:I think that's yeah. We talked about the sugar price producing, you know, and uh but again the Aussie dollar hasn't helped us either. It's sort of gone from 62-ish to 65 where we are today, which again is sort of always counterintuitive because we've been reducing our interest rates for now. I suppose it's just that reflection of Australia being relatively stronger than some of the other economies that are out there due to all this volatility in the in the environment. It's interesting to sort of note that that uh Brazil has also been strengthening cars at current their currency as well. So to be honest, that's probably been positive for sugar prices. It could have been you know much worse if the if the real had had weakened over that period of time. But I think it's gone from about six to about five point three. So it's quite a quite a significant strengthening for the real.
SPEAKER_00:Yeah, it'd be it'd be interesting to look at you know Brazilian real sugar prices last year. We know we know what they were doing in Australia, obviously paton prices at record highs, you know, um 18 months ago, and it was the same in Brazil. You know, with the weak currency and the strong sugar price. So, you know, again, there's some hope that if the real continues to strengthen that the you know the Brazilians will start making different planting decisions. But again, these are these are long-term uh uh factors. They're not going to change the outlook and the crop mix this season, this coming season.
SPEAKER_01:I think one thing also, Doug, you just mentioned there, which was interesting, is you know, even though the Brazilians have had extremely high prices as well, I think one of the things I read the other day was that their percentage of priced uh cover for 26 season is extremely low, like very, very low. And I think that I know that's one of the things we're talking about here in Australia is you know, we have a very low percent cover as well. I think we're about 10% covered for 26 season at the moment. And so what that means, I suppose, given the scale of Brazil, is we've got a lot of selling pressure out there, haven't we, still to come to the market, which is very unfortunate, because you know you yeah, you'd expect those high prices in Brazil, they would have taken advantage of that and done some forward cover as well. So that's just one thing to keep in mind that we are gonna see probably further Brazilian selling as the market, yeah, any any pop-up in the market, they'll probably see a bit of Brazilian selling pressure as well, won't it?
SPEAKER_00:Yeah, look, that's that's correct. And and and you know, generally um, you know, producers are fairly optimistic. And, you know, when prices are going up, everyone thinks they're gonna continue to go up. And when prices are going down, generally people are hoping they'll go up. So with the prices where they are currently and where they've been over the last 12 months, I think people are, you know, going to be looking back over the time and thinking, well, what could we have done differently about managing this risk? And and maybe, you know, that's something we can talk about a bit later on in the podcast, Ougal. But you know, uh what we've seen historically and and if we think about agricultural cycles and the inevitability of surpluses being followed by deficits and then you know, rinse and repeat, you know, what can we do in the long term to manage that price risk associated with you know what what we know is inevitable with an agricultural commodity?
SPEAKER_01:Yeah, I know we we we do touch on that in our business essentials courses where we use the risk, the risk assessment to be able to help us work out what what are your key risks? And I think we know that sugar price volatility is a major risk for any sugar producer. But it's also for sugar users too. I know Doug, you and we both been sugar buyers in our time, and I think it's the same risk that you're trying to manage as a buyer, I think, isn't it, where you you know you you don't want to have extreme highs as a buyer. You obviously want to try and buy you know low as as often as you can. And I think one of the things, you know, certainly I know when when I was a buyer, you know, our cost of production, understanding our cost of production and what makes us profitable is very important because it it helps you work out what's a what's a good price to be able to try and take some cover on. And I think it's the same thing for producers. You know, that cost of production is very important to help work out what is a genuinely profitable price for your for your business. And I think that's hopefully one of the things that you know the work we we're doing in the industry can help growers work out what is that cost of production level to be able to take advantage of profitable prices when they're when they're there.
SPEAKER_00:Yeah, it's it's a good place to start with risk management, isn't it? Because you often I think we hear people talking about wanting to price at the highs or you know, get the best price possible. And and I think the only thing that we know is that we won't know what the high is until we look backwards over the previous season. So I think coming up with a pricing methodology that eliminates the speculation and and institutes uh you know a risk management procedure that comes back to what your cost of production is. I think that's a great way to manage your price risk over a long-term period. And we always worry, you know, uh and keep an eye on what percentage the industry is priced and what type of averages. But I mean ultimately, you know, it's up to most individuals who are managing their own price risk to develop their own strategy. But I think the key is there to to develop the strategy and then keep implementing it over a long term rather than chopping and changing season by season, because that runs the risk of missing an opportunity at higher levels and then being forced into pricing at a low level when you know the seasons are going to come to a close. And it'll be interesting to see, you know, as we move towards the end of this and next season, what type of opportunities are gonna present from here, because we we don't know the answer to that today.
SPEAKER_01:I think you're spot on there too, Doug. There's a there's a ri there's a really big difference between an opportunity loss where if you're a seller and the market keeps going up and you've done your pricing at a certain level which you're happy with and it you're it gives you a good profitable uh level. But if the market keeps going up, you've obviously, you know, the market you you you could have potentially got a higher price, but you don't know what's ahead of you at the time when you're making those decisions, do you? So that's an opportunity loss. Whereas today with four you know,$470 a ton, for some growers out there, this is probably actually below their cost of production. So actually that's a that's a a loss for your business. So that's where you know the one thing which we do know is the market's going to be volatile. And we also know, you know, hope hopefully the main objective is to secure as high as possible above your cost of production so you can be as profitable as possible.
SPEAKER_00:Yeah, well, uh look like I came back to you before, Doug, but I think it's it's very important for for you know for businesses to think about these things in advance. And and and often what you see in a corporate environment, the larger trading entities is that the policies and the and the strategy around your risk management is developed way before you make the risk management decisions. And I think trying to come up with that on the on the fly is where things go wrong, because we know that psychologically people are always wanting to price at the highest possible level, and often we're not focusing in enough on what's a profitable level for me. I know that you know the businesses that are you know um larger, listed will will tend to have those policies which eliminate that speculation around that. And in situations where a business can maintain long-term stability and profitability, those six those situations are mandated by policy that action needs to be taken to lock in those for future seasons. And I I my concern is at this point is that you know, if we look back over the last few few seasons and were at to analyze the results of people who were managing their price risk in a long-term sense and the outcome of people who simply defaulted into the harvest pool. You know, there'll be different outcomes. And I fear that people made their risk management decisions on the basis of what they thought were those outcomes. And and as a result, I think we've come out of a very high-priced environment, generally underpriced as an industry. So I think I think, you know, as we look forward to the to the next cycle, which will inevitably come, I think it's important that we, you know, document and learn from you know where we are today in the hope that we, you know, we can uh you know avoid those types of uh situations in the future.
SPEAKER_01:Yeah, Doug, I think it's one of those things, yeah, especially if you're in the the the prompt season where it's particularly volatile. I mean I think you and I have both been the situations where you just get the market wrong, yeah, because you know things happen which you're not aware of and you know, things that are that are happening, you know, then you can't control the Indian government decisions, you can't control you know what Donald Trump does. So these things move markets. So it's it's very, very hard to to pick the market very accurately, consistently all the time. But I think what we what we can know is obviously that you know today the the prompt season is the lowest out of all the seasons, and we see the forward prices are actually significantly higher, like even fifty bucks a ton higher than where we are today. So that I suppose is telling us that the buyers out there are still valuing sugar in those forward markets much higher than they are today. So that's that's gives us hope, and those levels should be certainly up above the cost of production uh versus where we are today as well, hopefully.
SPEAKER_00:Yeah, it's a good point, Doug. Well, I think you know, we we're still, you know, faced with the decision about what to do with prompt prices, but it it is it is a good opportunity to start to look at future seasons and our own individual circumstances and thinking about you know w whether those types of prices are going to underpin future profitability. So I think you're right, it's always good to look at each season and the price of each season separately and and you know have your best estimate of what your costs are and what your future goals are, because there certainly is uh you know a uh a difficult decision with regards to the prompt, but uh I'm much more um you know optimistic as we start to look down towards the future and deferred seasons.
SPEAKER_01:Yeah, so I think it's in these market conditions, Doug, where you know obviously having a look at your cost of production makes a lot of sense. You know, maybe chatting to your your team, your accountants, and other people out there to sort of go over some of the information there is, you know, really helpful. And I know you know you you and I have been doing the Business Essentials courses with the Cane Growers team now for a little while, and I suppose that's the that's the sort of environment where it's good to be able to talk about these things as well, isn't it?
SPEAKER_00:Yeah, hopefully we get the opportunity to to see a few of uh of our growers at those sessions. And you know, I I've always found them to be different each time we do them, but the underlying message is about uh, you know, just managing our risk better. I mean, the only thing we can say, Dougle, is neither you or I know where the sugar price is going, and you know, the future direction is determined by events that we don't know. But you know, how how can we best manage that risk knowing that you know the the uh the future is definitely uncertain? So got lots to think about as we head into to next year, and hopefully those business essential sessions are of are of interest to the growers.
SPEAKER_01:I think the one thing we do know is it's gonna be when we do catch up again for this chat though in a couple of months. Yeah, we know the market will have been volatile again, and there's probably lots of uh interesting things which will have happened which we can't predict today. So yeah, looking forward to catching up with you again soon, mate. 100% right.
SPEAKER_00:Thanks for having me, Google, and thanks everyone for tuning in. Thank you guys. See ya.
SPEAKER_01:Please note that Cane Gross does not have an Australian Financial Services license, so all the information contained in this presentation is general information only.