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Maximising returns with sugar from around the world

Friday, 22 June 2012

 

Last column I discussed QSL’s other origin sugar program, why we need to source and supply sugar from countries other than Australia, and how the program is really about maximising returns, meeting customer demand and maintaining long-term, sustainable business partnerships.

This column I will explain how the other origin sugar program helps us maximise returns for members and answer some other common questions.

QSL’s sales into the Asian region, where we export the majority of our sugar, command higher premiums than other markets. When Australian sugar cannot meet the region’s existing demand, sourcing sugar from other origins helps us increase our sales volumes to the region and helps us to position Australian sales against highest priced shipment positions. The profits from these increased sales are passed back to members in the form of reduced marketing fees and operational costs.

QSL’s core objective is to maximise returns for members, so we only sell sugar from other origins when there is the opportunity to generate revenue for members. We have a policy in place to ensure this core objective is always supported and this policy guides all activities.

As we know, the structural supply deficit in Asia and the moving supply demand situation in each of the shipment positions listed on the futures market means there are strong premiums on offer in Asia and values for delivery months will move over time.

We view this as likely to continue, so the other origin sugar program is an important growth opportunity that will complement our core business. The program continues to evolve and we now have processes in place to oversee foreign ship loading which helps preserve the quality and integrity of this sugar.

Some questions about this program have been raised in the past, so I’ll answer a few of the most common.

Does supplying foreign sugar lower the reputation of Australian sugar?

Australian raw sugar has a well-deserved reputation for premium quality that we take seriously. QSL has a series of robust quality assurance and control safeguards in place to monitor the quality of our product. We apply controls to all sugar to so that all sugar meets our customers’ expectations.

Does this program expose members to high financial risk or increase the chance that QSL could incur losses?

As I mentioned before, QSL has a policy in place to only source and supply sugar from other origins when there is a clear opportunity to generate revenue for our members. This ensures QSL does not pursue sales that have an unacceptable potential to incur losses. There are a number of robust risk management practices overseeing this program.

Is QSL helping foreign sugar industries by exposing customers to other origin sugar?

QSL only sources and supplies sugar from other origins when it helps us meet clear customer demand that cannot be filled with existing volumes of Australian raw sugar. This helps us maintain our long-term, high-value customer relationships for the benefit of our members. Australian raw sugar remains a premium product and our customers’ exposure to foreign sugar does not change that.