Sugar Not So Sweet? From A Listener

Hi JMA

The following email and the resistance of my customers to the latest price increase in refined sugar has prompted me to ask the question: who controls the pricing mechanism of sugar to small Jamaican manufacturers in a monopolistic market.

Please be advised that as of Monday October 3, 2016, the revised price for sugar (credited) will be US$39.20 for around town and US$39.50 for out of town deliveries.

This increase is unavoidable as world sugar prices have gone up almost 50% since January this year but we have been able to reduce the impact of the increase by forward buying on the world market. The world market is in a deficit position and opposite to what has existed before mid 2014 to January 2016 where there was a surplus.

Up to September 30 the price stood at USD 32.88 per 110# bag. We are billed in USD.

The above price notice from my sugar supplier/ broker has raised a few questions in my mind about the pricing mechanisms used by local sugar brokers/ suppliers to smaller* Jamaican manufacturers who as far as I know are locked in to a Jamaican sugar distributor.

*smaller = unable to import their own sugar.

It seems that smaller manufacturers are being forced to purchase in essentially a monopolistic (locked in) market where natural competitive forces are not always at work.

My admittedly limited knowledge of the current mechanism by which smaller manufacturers purchase DUTY FREE (WAIVER) sugar is as follows:

The mechanism by which local distributor to whom we are locked into for six months arrive at the price to resells the sugar at to the smaller manufacturer is where my concern lies.

1.  Do all sugar brokers bill smaller manufacturers in USD. 
2.  Do sugar brokers apply a price spread ( e.g. how banks handle fx sales) or is it a percent mark-up ( e.g the retail trade). A price spread is better as the percent mark-up increases with the purchase price.
3. What is or should be the relationship between world market prices and price to the smaller manufacturer be? 
4. Given the fact that we are locked in to a particular broker, how can we know that the sugar is being competitively priced. 
5. Should local sugar brokers publish the prices they supply smaller Jamaican manufacturers at say quarterly?? Transparency would help to eliminate some of the temptations of monopolies to overprice. Fair trade would then safe guard against cartelization of the price.

We hope that this will be carefully looked at by the JMA. Smaller manufacturers need protection also.