CBL Information Session QSL Update 20 M ay 2015
Overview Sugar marketing impasse • update Key market themes • QSL ’s management of the • market Current indicative QSL pool • prices 2
Sugar M arketing Impasse – Update • Federal Senate Inquiry & Code of Conduct Taskforce reports due next month • QSL seeks an enduring commercial resolution where growers are given a choice of marketer • We are planning for 2 tonnage outcomes in 2017/ 18 Contractually guaranteed model: A similar range of 1. services at an overhead cost <$5/ tonne. 2. Base case model: Assumes QSL can compete for growers’ economic interest tonnage, offering an improved range of services. 3
What ’s the M arket doing? N11 Prompt Price 16.00 15.50 15.00 14.50 14.00 13.50 13.00 12.78c/ lb 12.50 12.00 11.50 1/ 12/ 2014 1/ 01/ 2015 1/ 02/ 2015 1/ 03/ 2015 1/ 04/ 2015 1/ 05/ 2015 Price US cent/ lb. 4
What ’s the M arket doing? Current forward curve (AUD/ mt IPS) 5
Key M arket Themes • M arket has been choppy after the M ay 15 expiry • Producers have been hitting the market very hard in the last week and specs have bought back their short, now neutral • BRL/ USD very volatile: 2.20 to over 3.00 in 12 months • Brazil crop looking good. El Nino could affect harvest • Indian &Thai crops good. No reductions in production ahead • AUD/ USD volatile, trading up to 0.8200 after RBA rate cut • ICE11 = 12.78 c/ lb AUD = 0.7970
Looking forward Small deficit previously predicted is unlikely • Physical market in the doldrums - most homes are fully covered • & stocks very high. Commodities, in general, are relatively cheap • Brazilian economic stability & volatility of the BRL will be critical • Chinese production looking smaller & local market is very high • Brazilian & Thai producers pricing, restricting rallies >13.50 c/ lb • in July.
The market is encouraging storage A$30/ t available at the moment – was up to A$60/ t in 2014/ 15 8
Why timing is everything • Futures positions reflect expected supply and demand • Later positions usually higher than the prompt, due to cost of carry • Current Thai and Brazil surplus sugar to be shipped by Oct15 means later market positions are paying more • QSL has to make some sales against the Jul and Oct positions due to storage constraints • Still plan to store as much sugar as possible to leverage higher prices in M ar, M ay and Jul positions
Sales timing key for optimal pool performance • The difference between futures positions is called ‘the spread’ • Traders buy and sell spread levels and source alternative origin sugar to take advantage of these pricing differences 10
QSL ’s management of the market • 2014 pricing is 99% complete – $60 million ahead of benchmark • Good sales in place for 2015, with over 60% already sold but only 25% priced • Pricing ahead of benchmark and very active during recent rallies, with an underweight position of our AUD coverage • Have taken action to protect the 2015 pools, with some floors already in place and are considering ‘put’ options for M arch and M ay 11
Current performance – 2014 Pools 2014 Season Net Pool Performance vs Benchmark ($A/ mt IPS ) $460 $435 $435 $434 $440 $423 $420 $411 $407 Net AUD/ mt IPS $399 $400 $380 $368 $368 $368 $368 $368 $368 $368 $360 $340 $320 Actual Passive Actual Passive Actual Passive Actual Passive Actual Passive Actual Passive Actual Passive Bench Bench Bench Bench Bench Bench Bench Harvest Actively Discretionary Growth Pool 2014 Forward Guaranteed Weighted M anaged Season Floor Average
Indicative 2015 QSL Pool Results 2015 Season Net Pool Performance vs Benchmark ($A/ mt IPS) $440 $434 $430 $424 $420 $410 $401 Net AUD/ mt IPS $400 $386 $385 $390 $384 $380 $375 $375 $375 $375 $375 $375 $370 $360 $350 $340 Actual Passive Actual Passive Actual Passive Actual Passive Actual Passive Actual Passive Bench Bench Bench Bench Bench Bench Harvest AM P 2015 3 Year 2015 2 Year Guaranteed Floor Weighted Average 13 Forward Season Forward Season
QSL ’s Grower Reps Joseph Russo Gerard Puglisi M ichael Pisano Thomas Harney T ony Castro M ark Blair Anthony Ross Jeffery Atkinson Philip Deguara Kevin Joseph Borg Nirmal Chohan Vincent Ross Francis Perna Jeffery Day Kelvin Griffin Barry Stubbs Richard Skopp Roger Piva Russell J ordan Ramon Poli David Lando 14
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