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
Sugar Prices Are Below Cost So What Happens Next
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Sugar doesn’t need a headline to hurt, it just needs to sit below the cost of production for long enough. We’re back with the CANEGROWERS Marketing Information Service update for June 2026, and the message is blunt: prices aren’t where growers want them, shared pool add-ons are under pressure, and the market is still working through surplus supply from the last upswing.
We’re joined by Tom from Green Pool and Rob from Famarco to unpack what’s really driving the global sugar outlook. We talk Centre‑South Brazil’s huge crop and rising input costs, Thailand’s switch toward cassava and the production hit from disease, and why the EU could step down next season. On the demand side, we look at how China’s stronger production and Indonesia’s slow import permits change trade flows, plus how the Middle East conflict disrupts refinery buying and the usual stock-building behaviour.
For Australian cane growers, the practical issues land in the shared pool: softer Far East premiums, lower polarisation upside, and marketing costs that don’t fall just because the futures price does. We also get specific about forward pricing and risk management: what “time in the market” buys you, why knowing your cost of production matters more in a low-price year, and how to avoid backing yourself into a corner while you wait for the next cycle turn. If you’re watching El Nino probabilities and the Indian monsoon for a trigger, you’ll want these frameworks in your pocket.
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Welcome And Market Snapshot
SPEAKER_02Hello and welcome to the Kane Growers Marketing Information Service Update for June 2026. This is Doogle Lodge to help provide a little bit of an update on the sugar market and start to look at what's ahead for the 26 season. Joining us today, we have the guys from Famako and Greenpool. Welcome Tom. Welcome Rob. That's um 26 season. You know, the season's underway. Unfortunately, sugar prices aren't probably where we would like them to be, unfortunately, compared to the last couple of years. But introducing Tom and Rob, obviously we're here to talk about this a bit. We're very lucky. I think in Queensland we've got some of the best global milling companies and marketers, and we also have some of the best analysts. So have Greenpool here today. Greenpool Tom, obviously one of the best known global analysts in the sugar market. So fantastic to have you here in Brisbane and to talk to us about the sugar market. And obviously, Rob, you know, the Famako business is probably the pre-eminent advisor in the sugar market. So great to have you here as well so we can talk about what's out there in the sugar market and what the what the sort of outlook is for the season. So I might just quickly ask you guys to introduce yourselves. Tom, nice to have you here at Cane Grobbers.
SPEAKER_00Thanks, Stubil. Yeah, um, Green Pool's been around uh since 2011 and been in uh sort of market analysis prior to that as well. So we have a team of uh around 10 or 11 globally, with a couple of people offshore uh in Brazil and uh the US in particular and in London. Yeah, we do uh global market analysis, we write reports for clients, we try and uh put together a global picture every month or so of where supply and demand are at and also trade flows. And we work in the biofuels markets as well with ethanol and biodiesel. So um personally, yeah, I've been around the sugar industry for quite quite some time. That's an understatement. So uh yeah, I've started off with CSR and QSL, um, did a bit of work in meat and livestock along the way, and uh have basically been in Green Pool um since its commencement. So that's about us.
SPEAKER_02And you have been a pool manager at various stages in your career as well, Tom?
SPEAKER_00Well, I've sat in on the discussions around pool marketing. I I don't know that I've ever pulled the trigger on everything in a pool, but um certainly uh uh sat around and tried to nut out where prices were going enough times through my career.
SPEAKER_02And Rob, welcome back. It's been about a year, I think, since we had you last on the podcast.
SPEAKER_03But be very close to. Thank you, and thank you for having me back again. Yeah, so just a little bit of uh a rundown on Famarco. Um Famarco's been involved involved in commodities or ag commodities uh since 1985. Um I've actually been with the company since 96, so 30 years. It starts to add up a bit. And um, but predominantly um while we do grains uh and cotton and what have you, sugar is a is a sizeable part of our business. We've sort of been involved back in the industry because uh my first job out of uni was working for Tom at what was then the sugar board. But for the last 20 years we've been back involved in in sugar, supporting either mills, running pools, or supporting growers with their with their pricing or their forward pricing. So, yeah, we sort of see a bit of what's
Where Sugar Sits In The Cycle
SPEAKER_03going on in the uh in the industry.
SPEAKER_02I suppose, you know, lots of uh experience between both of you guys, and I think that's one of the things with commodities, you do see cycles, I suppose, come over these years, don't you? So where do you think we're at the moment, Tom, in terms of the cycle for sugar?
SPEAKER_00Well, I'd hesitate to say we're at the low point, but we must be somewhere close. So, you know, if you take sugar, usually has a five or six year cycle, depending on events such as the weather events and where the market's been. Usually high prices spur production, low prices cut production. Consumption ticks along, you know, it's not what it used to be, but it certainly ticks along at a a small percentage per year. And uh it's those under and over supplies combined with uh, you know, the big cycles in weather patterns like El Nino, La Nina that provide uh, you know, the interest in the market and the projections and the the forward pricing uh by you know all producers and the forward buying by consumers.
SPEAKER_03Yeah, I think it's fair to say that we're you know, if you took it as a five-year cycle, we're halfway through, we're two and a half years since the last peak. Shortly it'll be three years. So, you know, probably along with what uh Tom's saying, you know, we'd we'd certainly like to think that in terms of that cyclical nature, while we may we may stay in first gear for a while or f you know a number of months yet, that at some point we will get a um, you know, this market will start to tick higher for the various reasons that that Tom outlined.
SPEAKER_00Yeah, it's it's usually price well below cost of production that that drives the next cycle. And uh, you know, we are definitely below cost of production globally on price. So some some markets set their own prices, like in India and the US. But for those who depend on the global market, you know, they're being given the signal right now to cut back production. And that that combined with uh you know some weather event down the track is usually what what turns things around. But the timing of that's uh certainly to be determined as yet.
SPEAKER_02If you're looking at some of those big producers, Tom, you know, are you seeing the signs that we might see some contraction in supply starting to come through at some point in the near the near you know the next next year or so?
SPEAKER_00Yeah, I think we're we're in definitely a transition phase. So we're still getting the the overproduction from the high prices still coming through on the market. So, you know, Center South Brazil, for instance, uh probably having a 630 to 650 million tonne of cane crop. That's big. It was driven by three or four years of good prices in Brazilian Reales. But right here and now, um they're being impacted by high diesel, high, high fertilizer prices. And, you know, the biggest producer in Brazil is is in bankruptcy proceedings, not because of low prices, but because of other issues in the company. So, you know, we'll definitely see some pullback there. How much is yet to be determined? But right here and now the current crop is good. What we're seeing uh elsewhere, Thailand, for instance, the second biggest exporter, you know, cassava pays better than cane there now. And cane, uh, you know, there's a high dependence on just one variety in Thailand, and that's definitely damaging their production outlook. So white leaf disease in the north, some um red rot and other diseases of cane. But in that one variety, it's it's being very hard hit by white leaf disease. So, yeah, now we're seeing uh a projection for for Thailand that could be two million tons of sugar less next year. And similarly for the EU, you know, um I think most estimates around the market are that the EU will drop a similar number, you know, 1.82 million tons of sugar for the for the coming crop in 26-27. So, you know, the the seeds of of the next cycle are there or the or the upswing. And then of course you've got whether we do or don't have this big El Nino event. I mean, it's being talked about a lot. We're right in the sort of very early phases of uh of that cycle. It's usually April, May that the switch occurs. So we've just come into June, and you know, the the big um prediction bureaus like uh NASA, uh NOAA in the US are saying, well, 80% that it occurs in the next two months and 90% thereafter. So we're we're not far from it being very close to being a certainty, but yet, you know, in Australia we sit we seem to on the East Coast at least seem to be getting more rain than normal in center-south Brazil, where they had uh heavy rain in March-April, it's now switched back to really quite fine weather for for a stretch. So it seems to be surging, uh coming and going. So we're we're no one's really a hundred percent certain on this thing, but it seems likely that we're transitioning into an El Nino phase. So they're the things that uh that eventually do turn the cycle. One low price. You know, consumers uh should take in a bit more stock. Whether they're doing that or not is up for debate given this gl uh the war in the Gulf, making um the consumption side very difficult. But at the same time, we know producers globally are really struggling with prices. And that's definitely giving the signal to cut back on production, increase consumption, and uh, you know, that's usually the seeds of the next cycle upswing.
Supply Signals From Brazil To EU
SPEAKER_03I think one of the positive ones in there, Tom, and you probably didn't mention it, or maybe I mentioned later on, is India. Uh the Indian crop, two years running now, has has failed to meet expectations. The government had allowed exports and then had to turn around and ban exports at least till the end of September. But I think prospects, and and Tom, you'd have a clearer idea than I would, but I think prospects for the coming crop are no better. And stocks in India, if if you rely on the numbers, are are quite tight. So it doesn't, you know, in terms of the setup looking further out forward, at the moment, it doesn't look like you know India's India's not sitting on a huge amount of stock that all of a sudden if global prices rose, it would come tumbling out onto the global market. Their cupboard's pretty bare.
SPEAKER_00Yeah, usually in an El Nino event, the big impacts can be either drought in India, Pakistan, or more the eastern side of Asia, between, you know, the bottom of China, Thailand, Vietnam, Philippines, Indonesia. Usually it doesn't impact Australia all that much. You know, the north gets finer weather, which they usually grow a better crop. The south gets drought, which they grow a worse crop. So it sort of evens out in Australia just because of the geography. But but again, sometimes in some El Nino events, uh center South Brazil can get wetter than normal weather. And if you hark back to 2010, 11, 11, 12, through that cycle where we did have this conflicting pattern of emerging La Ninas, El Nino's La Nina, they they were hit hard by that. But they were in the early phases of adopting mechanical harvesting. And a really wet harvest in in 2011-2012 caused enormous problems for the next couple of years. And and therefore we did see high prices through that period simply because the world's biggest producer had uh a lot of problems getting over having harvested a complete harvest in the wet.
Thailand’s Cassava Switch And Disease
SPEAKER_02So we've got a quick question for you about Thailand. You mentioned cassava is now returning better returns for farmers than sugarcane. The last time that happened, that was quite a big change in the crop, wasn't it, where cassava you know took away quite a bit of cane in the North East in particular, I think.
SPEAKER_00Yeah, um a lot of the uh farmers in Thailand are are quite small holdings. And you know, with these uh problems with sugarcane, uh the one the one variety getting disease issues and cassava paying better. Certainly there's some switching going on, you know, for a farmer looking at replanting a couple of acres of their farm, uh they'd probably go for cassava now over cane. So that's uh that's going to drive it. The cassava, you know, has several different uses. It's used, um chips are used for production of ethanol, both in Thailand and in uh China. China imports a lot of uh cassava starch and cassava chips, and then there's exports of cassava starch uh more globally. So there's quite a number of uses, and that market has picked up. So it swings and roundabouts in Thailand. You know, sometimes uh cane's a better crop, sometimes uh cassava's a better crop. There's a third crop, a third big crop there to consider also rice. It needs a slightly different field conditions to to grow rice, but those three, uh as you go up through the center and into the northeast, can compete for land. And so farmers see an opportunity, they'll they'll possibly go to the highest paying crop. Also, what we've seen in the last couple of years is government has really penalized farmers for uh for burning their crops, and it's usually the smaller guys that don't have access to machinery that do that, so that the manual labor can cut the cane a lot easier if it's burned. But the the government has uh penalized the farmers for that, and on the other hand, has promised to give subsidies for green cane harvesting, which haven't turned up. So, yeah, the government hasn't really uh favored ethanol in the last couple of years. There's a big swing back to ethanol uh currently for the government because of the price of oil. But you'd have to say farmers have lost a little bit of faith in in the Thai government's ability to carry through with some of those promises and also feel like uh prices are so low for sugarcane that it's an uneconomic crop for them.
SPEAKER_02What's the average farmer receive in dollars per ton of cane in Thailand the last year or two, Tom?
SPEAKER_00I'll give it to you in Bart. But but the comparison's interesting in that production costs are somewhere around the 1,300 baht per ton of cane. So $13,1350. In the 2425 crop, they received around $1,1150, $1,200 baht per ton of cane. So already for the 2425 crop, they were being paid lower than their costs. And for the 2526 crop, the provisional price has been 890. So that farmers in Thailand are probably now receiving something like 25 to 30 percent under cost. So that's just uh, I mean, that's uh probably a lot worse than than the Aussie uh outlook. And then on top of that, you know, you've got the disease issues and the non-payment of of of bonuses for for green cane harvesting and all those sorts of issues going on. Uh I think there's a bit of a bit of hurt going on there in the in the Thai industry right
China And Indonesia Shift Demand
SPEAKER_00now.
SPEAKER_02So, Tom, you mentioned you know there's obviously some reductions coming through some of the crops, but you know, obviously there's got to be some growth probably happening in some of the other markets where we know some of those protected sugar industries do provide pretty good cane prices for some of their farmers. What are we seeing in some of those markets around the world?
SPEAKER_00Yeah, look, um certainly from the high prices we saw two to three years ago, you know, that naturally spurred some production. And it was given a kick along by very good weather in the last 12 months. A fairly neutral weather year. Um most crops had plenty of fertilizer and good weather conditions. So naturally we did see good yields and and good outcomes. Europe, for instance, although the European factories were asking growers to cut back, the cutbacks in area were actually compensated by yield, so that they ended up with quite a decent crop. Uh, after all, that was for the 25-26 crop. Uh, China's having uh a very good run at the minute. So China we expect to be very close to 13 million tons production. It isn't that long ago that China was doing, you know, 10, 10 and a half, less than 11 million tons, so so up around 13. And between you know, China and Indonesia, they're the two biggest global importers. China with better production still has been importing and building a bit of stocks, certainly on the industrial side. But uh, you know, looking forward, that that requirement to import will possibly be less. Indonesia has been very slow to authorize imports this year. And there's a lot of politics going on with the in between the Indonesian sugar industry and the government. The government has to give permits to import, and that's been a very slow process and a very political process. Last year they put a lot of the company CEOs in jail. There was something like 10 or 11 went to jail for conspiring on prices, etc. And so the government has really dragged its feet this year on um allowing those imports to come out, those permits. And so that's uh that's been a very slow process and resulted in possibly less than less going into Indonesia than expected. So at the same time, we're seeing production uh volumes coming through uh on the high side, we're seeing imports actually slow from the two biggest um importers. So, yeah, I think where we are in the cycle is that production surge from the high prices two years back is still carrying through, and it'll take a bit of time yet to turn around. You know, if we look at it from uh a trade flow perspective, so that's really just a perspective in the market whereby you look at what's available versus what's demanded. We're still seeing surpluses from a trade flow perspective. So exportable sugar from the big exporters is still in excess of what is being demanded. And what what's being demanded also has a bit of a Middle East flavor, what's going on there, the the war there, and several refineries are unable to take in uh volumes of raw sugar. Yeah, that would be normal behavior at this point in the cycle would be refineries stocking up at cheaper levels and refining at reasonably high whites premiums. Uh, but that has been disrupted severely by this war in the Middle East. So, yeah, well look, we're seeing those, the coincidence of those factors, oversupply, demand, both disrupted and a little less than normal given better production in a couple of those big consuming countries. And so uh, yeah, look, as I said, the the cycle takes a little bit of time to work through, and price reflects that. You know, it's not going anywhere, it's sitting a bit below 14 cent, a bit below 15 cents in that sort of 14.5 to 15 cent region. And uh, you know, combined with a a higher than uh last year's Aussie currency, uh it's returning uh pretty pretty average prices for for growers in Australia.
Why Shared Pool Returns Are Falling
SPEAKER_02So I think one of the things, you're just chatting about that regional flavour there, Rob, obviously extra sugar in Thailand's not great for the Faris premium. And uh we're seeing a little bit less demand, as Tom mentioned there too. So shared pool outlook probably not looking so great for 26 season either, based on what we're hearing, I suppose.
SPEAKER_03No, the shared pools, um, the outlook is not great. Um you know, we've had since 2020, we've had probably had now five years of I'll use the word exceptional, but very good shared pool returns. Prior to that, for the previous decade, you know, plus or minus zero was a shared pool return. We're certainly back to those plus or minus zeros, and and in fact, maybe on the negative side of zero for for 26. We'll see, as Tom said, we'll see how the back end of the season plays out. If the next tie crop is down two million tonnes, that that might help. But we're not going to, you know, for someone that's forward pricing or you know, a pool manager uh looking for that nice little bonus of a shared pool add-on, that's not going to be there this year by and large.
SPEAKER_02If we look at tie premiums, what they've they have been sort of down near the hundreds, haven't they? Hundred points uh in the last year. Whereas I know previously they're up what 200, 250 sort of points. Um as yeah, so it has a fairly significant impact. That's like 20, 20, 30 US dollars a ton difference, isn't it? So that does does flow through quite a bit.
SPEAKER_03Yeah, if you say that was 30 Aussie dollars a ton, that's a lot of income that's not that's not coming in.
SPEAKER_02So when we talk about the shared pool, there's obviously a couple of different components that go into that, whether there's the Far East premium.
SPEAKER_03Yeah, so predominantly the big the shared the shared pool is is all the physical marketing aspects. So park the ICE 11 and currency to one side, the biggest income or revenue stream in the shared pools is the is what we would term or what you we used to term the Far East Premium or the Asian premium. So because the Asian region or Southeast Asian region is in deficit, it tends to trade higher than the futures market, so hence a premium. Now that that has been, you know, in the last few years better than two cents a pound in a lot of cases, or close to two cents a pound. With the bigger Thai crop this year, that's that's come down a fair bit. And as Tom was saying, you know, China taking less, Indonesia taking less, that that doesn't help that equation. So if you take, you know, as you were saying, a cent a pound off those premiums, there's 22 US dollars a tonne, $30 Aussie, rough. That's gone. The other issue that the second bigger component there is the polarisation premium. So the premium for pollen sugar above uh 96 degrees. Again, it works on it's a percentage. So a low ICE-11 price and low regional premiums is just a percentage of a lower number. So the revenues, the revenues have come down quite a lot, and on the cost side, costs rarely go down, they always go up. So by the time you put those two together, um then this year, yeah, you're going to be either side of zero for a shared put return, or in fact, you know, potentially five or ten negative.
SPEAKER_02So I suppose, yeah, the the world market's come down, the physical premiums have come down a little bit
Forward Pricing Exposure And Fund Flows
SPEAKER_02too. I suppose, you know, one of the things we have in Australia is this ability to do forward pricing. You know, some of the other industries have that capability too. So how do you think, you know, how how are we set up at the moment, just in general, in terms of you know, have have we been able to take advantage of the previous prices or are we quite exposed to these current prices in the market, do you think?
SPEAKER_03I think globally we're quite exposed, where being the global sugar industry. Um and Tom, you probably have better ideas on where Brazilians and Thais are approached.
SPEAKER_00I mean, the estimates vary. But I think you've, you know, you've got obviously the the biggest producer in Brazil uh with some quite severe financial restrictions uh imposed on it. But the industry overall is said to be somewhere between 50 and 60 percent. Now, not every company. Reports where they're at. But that's as good information as what we could get. So for a country that's exporting something like 22 to 24 million tons of sugar of that export percentage, then they would be around 50 to 60 percent. The TIES system, you know, we think is um is somewhat restrictive in that they do price in a fairly tight window. And this year the B quota uh tenders were delayed. And all that sugar's mostly been priced through this last couple of months and and out to July. So that's probably been somewhat disadvantageous. It's it's bought a lot of pricing. At the same time that Centre South Brazil was coming into its crop and wanting to get ahead with its pricing. We had a lot of Thai pricing all aggregated in the first half of this year. Absolutely. So and I mean, you know, this is not all public knowledge, but it's not unknown either. And the hedge funds and the speculators know that producers generally are pretty reluctant to want to price forward in a a less than a less than remunerative market. So, you know, you've seen a lot of pressure coming to the market. There was the concept back in Brazil that the market had to go to 12 cents to clear ethanol in Brazil and and the sugar and and see enough sugar devoted across to ethanol. And then a fairly wide uh knowledge that producers were underpriced, which is natural enough at this point in the cycle. So I think the combination of those, I mean, if you look at the Aussie industry, it it's probably um walking into the 26 season underpriced compared to where it's been in the last couple of years. Not necessarily underpriced for where it is in the cycle, but compared to the last few years. And so naturally enough, I think um, you know, there there'll be a lot of selling that hedge funds are still sitting there with 120,000 lots short or sold in the market. Um, the aggregation of all those selling pressures is what ultimately ends up in a a lower price overall. Um might be interesting to mention, though, that index funds in the last month or two have been pretty big buyers in the market. That's the sort of behavior you might expect from the longer-term players as the index funds are. That um, you know, they see an opportunity there with an El Nino possibly uh being predicted at higher probabilities, plus prices below cost of production over a two to three year time frame frame that may um make the the index funds some money.
SPEAKER_02Well, I know certainly as a as a former buyer, that's the sort of signal to buy, right? If you get below cost of production, that's not a bad time to be sort of going and and doing some buying activity. So I'm sure yeah, you'll see that sort of behaviour from the big FMCG companies as well, probably out there, where they'll they'll look at putting some buying in as well. So, yeah, that's I suppose the the flip side of this, isn't it, that hopefully there will be some extra buying coming into the market too at some point.
SPEAKER_03Yeah, we haven't tried to work it out this year. Normally we we do a bit of a ring around and see what's going, but certainly the Queensland industry is walking into 26 with with very little pricing uh done. Um when I say that, you know, obviously there's the concepts of MEI. So um I don't know, but I expect the millers are far more advanced in their pricing than the than the GE, the grower side of the element. From what we're picking up, there's a lot more in pools or gone back into pools this year. So, you know, there's a there's a big swag of the of the Queensland crop that's that's got, well, that's yet to be priced, and a lot of that's going to get priced sort of, you know, SEPOC through to Jan Feb is going to see the bulk of that done. So it'll be interesting to see how it goes. If uh, you know, if if the market provides opportunities through then it'll be great. If it does a little repeat of last year uh and give very little opportunity for people, then you know it it yeah, it won't be the won't be an ideal year, put it that way.
SPEAKER_02Yeah, I suppose that that that period of time, isn't it? So that's where the bulk of the pricing will usually happen, isn't it? Yeah, across the industry, at least what 70%, 71%, 75% pricing will probably occur over that period, I suppose.
SPEAKER_03Yeah, m maybe it's not quite that much, but it'd it'd be better than 50 anyway. Just depending on you know what pools it's in and and what strategies the pool managers are are following and policies they're following. But most people, you know, the pools are going to largely be wrapped up by the time the March contract expires. Yes, there's a bit of May to go. But also then you you know you don't want to have a big exposure into the pool when your cane pay behind it starting to catch up rapidly. So, you know, by and large, by by the time the March contract's gone, she's she's not put to bed, but it's close to it.
SPEAKER_02So we're we're pretty much price takers over that window of time then, is sort of what what happens, I suppose.
SPEAKER_03Yeah, um I I'd probably look at it m uh a little bit more positively and say, okay, the the world global market's gonna deal us a hand of cards and we'll have to play those cards. Hopefully there's a an ace or two in there, but but there may not be.
SPEAKER_02Yeah, so we're just talking about the you know the the increased volume that's probably been allocated towards the uh pool, the pools this this season versus the last few
Playing The Pricing Window In 2026
SPEAKER_02seasons. Uh so that means I suppose a lot of those will be potentially managed by pool managers. But I think a lot of opportunities, you know, growers still can pull out some of their volumes and manage it themselves, or some of the growers may have chosen to price it themselves. What are some of the things you'd be thinking about, Rob, if you're if you're looking at the 26 season, and you know, what what would you be looking for?
SPEAKER_03If we're sort of looking at at 26, there will be you know some growers that have um forward priced and and opted to continue to to price or price in season, as we would call it. And I think for those growers, you know, there will be opportunities that that come along. They may be fleeting, they may not be uh big opportunities, but you know, it even even in a in a flat price sort of environment, sugar can still do three or four cents a year in terms of range. So at some stage, you know, something will, if you've got a bit of time, something will come along that that allows them to capture a little bit more than than potentially the average. Because the industry really has carried so little forward pricing into 26, you know, we're two and a half years into the cycle, then a lot of people have have moved back into pools to some degree. And the and the pool manager then is facing really the same. They're again dealt exactly the same cards as the as the grower that's individually forward pricing. And again, they'll be looking for you know for opportunities to you know improve price or or beat the average or whatever they're kind of targeting. But you know, as we said earlier in the in our conversation, it's the pools and anyone taking pricing in season, and then nothing wrong with that. But eventually time starts to to tick away. So you've only got a fairly narrow pricing window for 26.
SPEAKER_02And so I suppose um you know, with the the current market outlook, you know, Robert, the market's moved a bit since this time last year when we
Cost Of Production And Long Runs
SPEAKER_02we caught up. I suppose it's a good time for growers to go and re-redo their cost of production just to understand what impact some of the recent fuel or fertilizer moves might have actually done to their costs, I'd imagine.
SPEAKER_03Yeah, I I think that's a a key thing. Um I had a little sneak peek yesterday, actually. It's about $100 a ton lower than when we spoke last year. Actually, about it's $100 lower a ton than this time last year, which is not insignificant and um and shows you how fast or how far and fast sugar can move in a in a short period of time. The cost of production uh is a big one and you know people do need to have a look at it in terms of making pricing decisions and forward pricing decisions, um, in particular, you know, knowing where your cash costs are, knowing where your operating costs are, other various signposts, and and I'm sure in your business essentials courses that cane growers do that they take growers through, you know, making these calculations or at least getting a fair idea of them. It's really important to know where you are from a profitability point of view. A little bit of a saying there is you know you you can't go from A to B unless you know where A is. So you've got to know where you are in terms of your actual costs. You know, what can I get away with? If the market gives me that opportunity, can I capture that? Those types of things. And you know, you mentioned before, you know, some of the pools these days are harvest pools, you can opt back out of them and and price them yourselves. And potentially that's that's an area where you might do that.
SPEAKER_02Yeah, we see a bit of a spike up, for example.
SPEAKER_03Yeah, you know, if if the market all of a sudden gave you $50 or $100 a ton and and you could opt out of one and and and and finish your entire crop and and know that you're covering a good part of your costs, or in fact maybe covering your costs, then that's certainly a consideration.
SPEAKER_00Just uh an interesting uh exercise I did with uh the market prices uh a week or two back. If we look at the last 10 years or the last 20 years, the average spot price in the market comes out very close to 18 cents. So no matter whether it's the short term or the longer term, if we take it back further than that, when you know Brazil was pricing at four and five cents and still making money back uh closer to 2,000, it's a bit different. But you know, the the average price in the market obviously reflects longer term where costs, you know, fully fully operational costs are headed. And so with this jump in uh in in costs overall, it's been a global phenomenon. You know, we can expect Centre South Brazil, for instance, is the most efficient. It's likely that their costs have gone up from that 14 to 15 cent region up to something like 16 to 17, 17 and a half cents. I don't expect Australia's much better than that. You know, it it's probably uh more in the 17 to 18 cent region now in US cents a pound at current exchange rates. So, yeah, look, long term the market, in my thinking, oscillates around those sorts of numbers. And, you know, we're currently sort of two and a half, three and a half cents below that at present. And uh, you know, hopefully we can return to more average numbers in the not too distant future. But we are where we are right now.
SPEAKER_03Yeah, as Tom said, we've there's still this surplus of sugar coming through, and and that's that's not going to disappear in weeks, that's a a months type thing. You know, so potentially the the light at the end of the tunnel, if there is some, is is probably more like 2027 rather than 2026.
SPEAKER_02So here we are, you know, below cost of production, unfortunately. Um two or three cents below cost of production in some cases by the sounds of it. So at these points in the market where it is very hard to actually execute a pricing strategy, because I suppose maybe the best strategy is to not price when it's below cost of production. But it's it's very hard, right? It depends on your market outlook as well. So I know you guys have both been running running pricing positions yourselves. It's it's hard for the average grower, I think, to be looking at some of these situations and working out what they want to do themselves.
SPEAKER_00Yeah, well, when I joined the uh the raw sugar marketing side of the industry, um, so I'd been a cane inspector in North Queensland, went to Sydney and joined raw sugar marketing. And I remember in 1986 when uh the EU was exporting a lot of sugar to the global market and prices went to two to three cents. In Aussie dollars per ton, the price was just below $100 a ton. And I was very much the junior in the room. I certainly wasn't the decision maker at that stage, but I remember people sitting around the table uh with their jaws dropped saying we can't do anything at this, it's just too low. So, yeah, I mean it's always tough in a down cycle. I guess uh those who've been around the industry a while um are used to this. We we uh are a cyclical commodity. You know, sugar's just beholden to both weather and price and the actions of of other players in the market. So things do improve in the in the longer term, but uh weathering the the down cycle is always a bit tough.
SPEAKER_03Yeah, I think um it it sort of depends on where you approach 26 from. You know, as a Famarco business for the growers that that we advise or support in their pricing, you know, we we'd love to have more, but on, you know, by and large they come into the year with probably roughly a third to half priced at values that are over $100 better than today's market. So how how we approach that in terms of of doing additional pricing is quite a bit different from, say, a pool manager or a grower that so far has done no pricing but has committed to price themselves. When you're staring $440 in the face for July or you know $460 odd or whatever it is for a seasonal price, it's much harder because you're not I always like to think of it in terms of a surfing thing. If you if you can start on the front of the wave in in a market and pricing and stay on the front, it is so much easier. If you just can't quite catch the wave or you fall off the back, you are you're chasing your tail and you at times get pressured into making decisions that you shouldn't make. So it's nice to it's nice to always be a little bit on the front foot. And I think with 26, with with a number of the pools, the pool managers are gonna be sitting there and and there's really no getting on the front of the wave at the minute. A, there's no wave, it's more like a little ripple. But it's gonna be a tough, uh tough year for the pool managers and and and how they you know, how they deal with with trying to get a decent return for growers in a in a low, low priced environment.
SPEAKER_02Yeah, I think right, I know Rob, one of the things we've we chatted about before is you know having that time in the market is actually such a such a great thing to have because we are in such a volatile commodity. So I suppose those growers who have done some forward pricing at least they you know should have prices quite a bit above the current spot prices or the current market.
SPEAKER_03Yeah, and and they do. You know, unfortunately it's like everything else when the price goes down you haven't got enough pricing, and when the price goes up you've got too much. But you know, the aim of it's the aim of someone consistently forward pricing is to be consistently profitable. That means in some years you're not getting the best price in the world. You're still getting, in theory, though, a good sustainable business price. So profitable price, so and then when you come into years like 25, which is last year's crop where prices were very ordinary, those people tend to sail straight through that. And you get into 26, and as I said before, while we'd love to have more on, at least we've got enough of a block that means 26 shouldn't be too bad a year. 27, well that's a a different kettle of fish again. But you know, again, we're talking cycles and things like that. So hopefully by 27 we're we're starting to get a little bit more of an uptick or at least at least have worked through this these surpluses from last from sort of the last seasons coming through the market. And you know, if you've got time, there's time for Il Nino to stir something up. There's time for the currency to move. Yeah, tight time is your is your friend. Eventually it becomes your enemy, but it's if you've got a bit of time. And we know sugar's a naturally volatile market. If you've got a bit of time, normally an opportunity will will pop
Wildcards And Setups For 2027-28
SPEAKER_03up.
SPEAKER_02So, Tom, is there anything you'd like to share with growers as they start to look at what could be uh a wildcard in the pack?
SPEAKER_00Uh I think a lot of what will go on for the rest of this year will uh rotate around how the monsoon in Asia develops. India spent a lot of time developing an ethanol program specifically for sugar that they're now finding very tough to accommodate sugar industry's uh ability to process ethanol. And so it's gonna be a fascinating situation if India goes through with such low stocks that they may even be forced to import. Now that's a bit of a wild card, but the monsoon this year is going to be more important than it is most years. So I think it's um El Nino and the monsoon in Asia will be the key thing to watch. Uh, if that um doesn't generate anything interesting, could be quite a dull year.
SPEAKER_02So we've got a bit of a roller coaster ahead of us. And I suppose one of the things, you know, it's always nice to have what to do, but it's also probably good to think about what's what are some good guidelines, you know. I think you call them guiding signposts, Rob, about what what things not to do. And so you guys have been round the traps a little bit. So growers out there, is there anything you'd like to suggest to sort of not do uh as they approach this year, which you know, not such great prices?
SPEAKER_03I I think I'd probably more align it into into s into terms of how people approach 27 and 28. I think 26, 26, the paths in front of us. Growers are either in a pool, it's the pool manager's responsibility, that the growers devolve that that responsibility to a pool manager. For the growers' forward pricing, you know, rely on um on opportunities that will come in the market. And and hopefully, you know, we often can get a from October, November through that period or Jan-Feb, we get a little bit of movement. Again, we've got a bit of time. But I would say in doing that, don't back yourself into a corner. You know, every now and again if you get a bit of a spike, do something. Don't leave 100%. And we see this every year. Someone will leave 100% of the crop, let it roll, let it roll, let it roll. Four or five years ago, or three or four years ago, that kind of worked as a strategy until it didn't last year, case in point. And you end up with a price that's barely over $400 a ton. But but I think it's more around we know sugar is cyclical. Well, unless it changes its nature, it's a cyclical market. We know at some stage there's going to be an upswing in the next three or four years, there'll be another high. And if it follows the same nature, then a couple of years after that, or less than a couple of years after that, we'll swing down into another low cycle. So my actual tip would be for growers who are interested in forward pricing, interested in being profitable long-term businesses and growing in the industry, is get themselves set up to go to make use of the next cycle. As I said before, Famarco's got growers that are still using pricing that was done two and three years ago. So the impacts of the current low prices aren't as severe. So looking at the next cycle, you know, things like go along to the cane growers' courses, work out your cost of productions, look at your business from a strategic and business point of view and know these things and sort of, and and even in amongst families and what have you, sort of set up a bit of a structure. It doesn't have to be formal, it can be informal, but at a point where you can start making pricing decisions and control the revenue streams of your business, which is important. Everyone wants to control costs and nail this and that. Well, you've got this dirty big line at the top called revenue. And I can tell you now that a dollar a ton of K and extra revenue in good marketing goes straight to the bottom line. Didn't cost you another bag of fertilizer, didn't cost you another litre of diesel. The impact is quite significant for the time costs and involvement in doing it. So that would be my tip is 26 will be what it will be. Deal with it as best we can. Move to get yourself set up for the next rise and peak and eventual fall in this cycle we call sugar.
SPEAKER_02So using your previous analogy, get ahead on the wave. So yeah, use this as an opportunity to try and get ahead on the wave because we're we're going to deal with whatever's here in 26.
SPEAKER_03And and it that's it's funny to use that analogy, but I've used it with clients before because sometimes you'll you'll take a client on and really every decision you make turns to gold. And then some clients will come on, it'll be a point in the market, and you just feel like you're slipping off the back of the wave all the time. And you know, come on, have faith, have faith. And um but yes, if you can get yourself, if you can be progressive and and and get on a roll with it and and understand what it's meant to achieve and what's it what it's achieving for you, and understand where you don't want to be. You know, if you if you want to be the highest price every year, well that's not your game, but if you don't want to be suffering sub-450 values as a final seasonal outcome, then you've got to be forward pricing.
Wrap Up And Disclaimer
SPEAKER_02That wraps up the June 2026 Cangro's Market Information Service update. Uh, really appreciate you guys coming in. Tom and Rob, thank you very much. Um look forward to hopefully having you come back in again sometime and talk about the cards we might be get dealt, Tom, you know, from the world market. And uh yeah, look forward to yeah, hopefully it should be a good season ahead.
SPEAKER_00Well, good luck with it, and uh yeah, happy to come back.
SPEAKER_03Thanks, Dougle. Thanks for having us, and hopefully uh next time we talk the market's up a hundred, not down a hundred. It'll be great. Thanks very much, guys. Thank you.
SPEAKER_01Please note that Cangros does not have an Australian Financial Services licence, so all the information contained in this presentation is general information only.