About Sugar Buying for Jobbers

Part 1

Produced by The Online Distributed Proofreading Team at https://www.pgdp.net (This file was produced from images generously made available by The Internet Archive/American Libraries.)

about SUGAR BUYING for Jobbers

How you can lessen business risks by trading in Refined Sugar Futures

B. W. DYER

A BOOKLET FOR JOBBERS WHO SELL SUGAR

Lamborn & Company SUGAR HEADQUARTERS 132 FRONT STREET · NEW YORK

Copyright, 1921 LAMBORN & COMPANY

About Sugar Buying

Jobbers who have had considerable experience in exchange operations will find in this booklet a simplified and non-technical description of activities with which they may be in general familiar.

We believe, however, that the inauguration of trading in refined sugar futures on the New York Coffee and Sugar Exchange, Inc., throws open a new realm of opportunity.

We have attempted to outline briefly the chief advantages to be gained by a jobber's use of this new market, assuming that those who have in the past dealt in raw sugar as a protection for their refined sugar needs will welcome suggestions as to the benefits to be derived from trading directly in refined sugar.

Time, the Croupier of Business

Like a croupier at a vast roulette table, Time presides over the realm of business.

Time is the tap-root of most business uncertainties.

No one can tell what will happen a year, a month, a day, a minute from now--the future may bring floods and wars, pestilence and drouth; or it may bring great crops and fair weather, happiness and prosperity.

As business has become more and more complicated, the time element has become larger and larger. The time element as we know it does not exist in simple barter--a man weaves a piece of cloth and exchanges it for a bushel of corn: time is of no account in the transaction. A small jobber located in the same territory as refiners buys a small amount of sugar today and distributes it to his trade the next--time is negligible. A large jobber, buying perhaps for several branch houses, or located at points which necessitate a delay of two or three weeks in transit, may find it necessary even on a declining market to purchase a considerable amount of sugar, and, as a result, weeks may go by before his sugar arrives and is sold--time is vitally important.

Time is an element in costs and prices, because over any extended period of time many things may happen to influence costs and prices.

All business planning must deal with Time.

To the unenlightened business man, Time is a bugaboo--a gambler whose cards are stacked and against whom there is no defense. Such a man conducts his business from hand to mouth, in constant fear. He is a fatalist, taking his profits and losses as if they were gifts or blows of Fortune.

The enlightened man works with Time as an impartial, exacting, inevitable power for his own good or ill. He shapes his actions and enlists the services of Time to prevent catastrophe on the one hand, and to enforce prosperity and happiness on the other. Storms may come, but so far as his mind may control it, he is "the master of his fate."

Cost and Selling Prices

That the element of TIME is important in the jobber's business no one will deny. He does not base his selling price on cost, but rather on the market price. Regardless of his cost, he must sell to meet competition. It is equally obvious that the larger his business, or the greater his distance from the source of supplies, the more important part TIME plays in both his cost and selling prices.

All jobbers, large or small, are obliged to assume greater risks (even proportionately) and exercise greater care, than, for instance, retailers buying in small quantities. A jobber's business may enlarge by a perfectly natural process of expansion, but his purchasing risks increase in greater ratio than his business expands.

Similarly, under abnormal conditions, jobbers located at points requiring several weeks in transit prior to delivery, must assume greater risks than those located at the source of supply. In the event of serious delays in deliveries or in shipments, even buyers located at shipping points are confronted with this problem, and the difficulties of those located at a distance are increased immeasurably.

These difficulties tend to accentuate the importance of TIME in modern business. As business grows, instead of decreasing--risks increase. Any machinery which might operate to eliminate or reduce this uncertainty or speculative element in a jobber's business, would, we believe, be welcomed. Exchanges provide just such machinery.

Other commodities, such as raw sugar, wheat, cotton, pork and coffee have had this machinery for years and it was provided for refined sugar on May 2, 1921, when trading in refined sugar futures was inaugurated on the floor of the New York Coffee and Sugar Exchange, Inc.

Where Buyers and Sellers of Sugar Meet

The Sugar Exchange is a market place, where buyers and sellers of sugar or their representatives meet to trade.

Part 2

The Exchange provides a concentration point, where, under any market conditions, sugar may be bought or sold at a price.

What that price is, is determined by how much sugar is for sale and how many people want it. If the supply is large and buyers are few, the price will be low. If sugar is scarce and buyers are numerous, the price will be high. Or, to put it in another way, when there are more sellers than buyers, the market declines; when more buyers than sellers, it advances. If the supply and the number of buyers are normally well balanced, the price will be determined largely by the cost of production and transportation. If events or circumstances operate to increase or curtail either the sugar supply or the number of buyers, and such events or circumstances follow one after the other alternately, the price will fluctuate.

These are the results of the operation of well-known economic laws.

In the case of all commodities which cannot be bought or sold at a common market place (or exchange), price fluctuations are usually wide and frequent, because no large group ever has common knowledge of supply, demand and other factors that govern prices--purchases and sales are made direct between individuals, and knowledge of the amount asked or paid is restricted to a limited few.

Through the common market place provided by an exchange, on the other hand, market conditions and prices become common knowledge almost instantly over the entire country. This tends toward stabilization--a fact which, alone, helps to eliminate risks, and enables merchants to buy at lower prices than if forced to deal direct with one another. Sellers do not have to take such long chances and can thus afford to sell on a smaller margin of profit. Competition is stimulated and freed from many of its complications and uncertainties to the advantage of the seller, the buyer and the public.

It is now admitted that, had exchange trading in refined sugar existed in 1920, a general use of the exchange by all branches of the trade might have prevented, to a considerable extent, the abnormal advance in sugar prices of that period, with the hardship and misfortune that attended.

The fact that an exchange always provides a buyer and a seller, at a price, tends toward keeping business fluid. Jobbers are able to protect their future requirements. Producers are sure of a market for their crops. Crop financing is made easier because bankers are more willing to loan on crops sold in advance--an operation made possible by an exchange.

Exchanges operate to take the gamble out of business. They help to put and maintain business on a sound basis. That some people who have no real interest in the commodity use the exchange speculatively does not alter this fact.

In providing machinery by which speculative risks incident to a jobber's business may be shifted from the jobber to those who make a business of assuming such risks, exchanges help to stabilize his business and to remove a large part of the destructive uncertainty with which he would otherwise have to contend.

Exchanges are the creations of modern economic development, designed and operated for the benefit of the commerce, industry and people of the civilized world.

Therefore we welcome trading in refined sugar futures and the opportunity to offer you the advantages that may be derived from a conservative, intelligent use of its services.

The Exchange provides certain quality standards and other regulations to safeguard your interests. But your real assurance of protection lies in the character and reliability of your broker. If your broker is not strong financially you do not have back of your contract the responsibility that you might otherwise have.

If you had a favorable contract with a broker who became insolvent, you would have no means of forcing the fulfillment of the contract, and no way of securing the profit which was due you. The thing to do, of course, is to choose a broker who is so strong financially that you incur no danger in this respect whatsoever.

Continue reading About Sugar Buying for Jobbers free in the Wunder reader →