DETERMINE YOUR BREAKEVEN SUGAR PRICE

Industry & farm Inputs

BURN ASHBURNER

One of the main principles of sugar pricing, which is covered in the CANEGROWERS Business Essentials program, is knowing your production costs and converting this to a sugar price.

If you are armed with this information, you will have a good idea of what sugar price you need to make a profit.

Table 1 from the Sugar Price Ready Reckoner in the CANEGROWERS Budget Tool shows the sugar price ($/t IPS sugar) with different $/t cane production costs and CCS.

The $/t cane production cost needs to come from a budget. This is clearly forward looking using the best estimate of future expenditure.

Many growers have quite stable areas under cane and inputs do not vary wildly. However, tonnes cane per ha and input prices can fluctuate and significantly affect production costs per tonne cane.

Table 1 shows an expected cost of production of $38.00/t cane which shows in the center of the rows with costs ranging from $31/t cane to $44.00/t cane.

The CCS is dependent on the season however it makes a significant difference to the required break-even sugar price. In table 1 the expected average CCS of 13.70 units is shown in the center of the columns with a range from 12.95 units to 14.45 units.

The constant ($0.66 in this case) is part of the cane payment formula from the cane supply agreement relevant to each region.

This is a negotiated figure developed over time but needs to be accounted for in determining the breakeven sugar price. The district CANEGROWERS office will be able to supply this.

It can be seen that at a production cost of $38.00/t cane and CCS of 13.7 units the breakeven IPS sugar price is $428/t sugar.

Nobody can predict the future and table 1 tries to provide the opportunity to get a “feel” for what a good sugar price is to lock in a profit.

It can be seen that if things go badly and production costs go up to $44.00/t cane (this would be about a drop of 20 tonnes cane per ha or costs going up by $6.00/tonne cane) and CCS drops to 12.95 units then the breakeven price of $538/t IPS sugar is required.

Table 1 is looking at the 2023/24 season but can also be used to have a look beyond this. As at 14 April 2023 the QSL future sugar prices (actual) available were 2023 - $736, 2024 - $648, 2025 – $569 and 2026 - $519.

Nobody knows if these prices will go up or down but they are likely to be above your costs of production. If so it is recommended that growers have a good discussion with their advisers to make decisions of what prices to lock in.

In order to have tools you or your accountant can use to determine your costs of product to convert to a sugar price and what other issues to consider in your pricing decisions attending a Business Essentials workshop is highly recommended. 