Queensland Sugar Limited’s shareholders are exposed to three main areas of financial risk on sugar exports:

Sugar Price Risk – Over 90% of raw sugar marketed by Queensland Sugar Limited has its price determined against the ICE Futures U.S. No. 11 contract for raw sugar. The ICE Trading Platform is a fully electronic trade execution platform developed and operated by the International Commodity Exchange (ICE), trading for around 14 hours each business day. It is recognised by producers and sugar refiners as the predominant world raw sugar price-setting tool. The ICE Futures U.S. No. 11 contract offers pricing, subject to liquidity constraints, for up to 3 years production in advance. Participants in the ICE Futures U.S. No. 11 contracts may be sugar producers, tradehouses, end users, index traders or speculators.

The balance is priced against preferential trade agreements, such as the U.S. sugar quota, and long term fixed price agreements.

In determining the futures contract for pricing purposes, the shipment or delivery period for the raw sugar is used. The ‘rule of thumb’ allocation against the ICE Futures U.S. No. 11 contract is shown.

For longer dated pricing activities, financial instruments such as swaps via third party financial institutions may be entered into.

Foreign Exchange Rate Risk – Nearly all of Queensland Sugar Limited’s sales are concluded for payment denominated in United States Dollars (USD). As a result, forward foreign exchange contracts are entered into to facilitate the conversion of USD revenues into Australian Dollars (AUD).

Interest Rate Risk – Queensland Sugar Limited manages the payment of all net revenues generated from its activities to the milling companies supplying the raw sugar. Queensland Sugar Limited uses its strong credit rating to minimise the cost of borrowing funds and maximise returns from the short-term investment of any surplus funds received prior to payment.