Euro decline may hit ‘optional’ sugar supplies
Jamaica could see a fall off in revenues from sugar exports amid the falling value of the euro, even with the sector's foresight in pegging most of the contracted shipments to the US dollar, industry experts say.
The majority of Jamaica's sugar is sold to Europe.
Some 70,000 tonnes of sugar is expected to be exported for the current crop year to British refiner Tate & Lyle with 54,000 tonnes quoted in USD and the remaining 16,000 tonnes quoted in euro, said general manager of Jamaica Cane Product Sales, Karl James.
The 16,000 tonnes are part of the optional arrangement under the agreement, "that is up to us, if we have it," said James. Both James and chief executive officer of SCJ Holdings Limited, John Gayle, say they are
keeping watch on the currency's performance.
The euro hit a 12-year low against the USD last week. It traded at US$1.06 on Wednesday, down from a peak of US$1.40 in May 2014.
"That 16,000 tonnes will be affected," James said. "Right now I'm just calculating the impact because what we did was to tie the price of the sugar that we are exporting to USD. So we have commitments for most of the sugar that we are supplying to the European Union this year in USD," James said.
The current sugar contract with Tate & Lyle was negotiated two years ago, but a new agreement is pending for the period ending 2017.
James said the JCPS boss has commitments to European
refiners, which must be honoured.
"We have a commitment to deliver by a certain time and we are expecting to deliver the next 16,000 tonnes by about the end of June or the middle of July," he said.
JCPS is now estimating that the 16,000 tonnes of sugar may fetch US$637 per tonne, down from the earlier estimate of US$708 per tonne, James said.