The Role of The Sugar Broker
Anachronism or Keystone In Today's Sugar Market?

Daniel L. Dyer. Jr.

The sugar brokerage industry is an old and colorful one, dating back before the National Sugar Brokers Association (NSBA) was formed in 1903. Today, with about 100 members, the NSBA is optimistic about the future of sugar in the American diet, as well as its role in the sugar industry.

Not all members of the industry, however, support sugar brokers in the same manner in which its brokers support the sugar industry. Some in the industry even go so far as to say that there is no longer any need for the broker in the sugar industry. They describe the broker as an anachronism - a throwback to the past.

To the contrary, sugar brokers have played a principal role in the sugar market in the past and present and will continue to be a "keystone" in the sugar market of the future. The term "keystone," defined as the main part or principal of a number of associated parts, that supports or holds together the others, best describes the role of the sugar broker.

The sugar market has evolved significantly since the turn of the century - even more so with the swift rise of high fructose corn syrup in the market. The basic qualities of a successful sugar broker, however, remain the same - integrity, knowledge and resourcefulness. These qualities, combined with a good command of functional skills in negotiation, mediation and communication, enable the broker to best serve the needs of his clients.

The brokerage industry is a service industry - one that is based on interpersonal relationships developed over time with sugar buyers/customers from the industrial user side of the business, as well as sellers/principals in the industry, and the domestic sugar companies.

The broker is a catalyst who not only may initiates the buyer/seller relationship, but who is committed to maintaining a healthy relationship as well. If a problem between buyer and seller develops, the broker is there as an impartial mediator to ensure that the lines of communications are kept open. The broker's essential function is to help buyers and sellers reach agreements to their mutual advantage.

The broker is in the business of selling his specia!ized services to both buyers and sellers. A broker, therefore, must be perceptive to the differing needs of both parties, and flexible enough to tailor the services according to their respective needs.

Today's broker no longer can rely solely in interpersonal relationships to earn the confidence and respect of his customers and principals. Although they serve as a business foundation, a foundation is worthless without a structure to support.

This is the Age of Information, and sugar brokers are in the information business. They act as an unseen extension of the buyer's and seller's staffs, with the time and flexibility to pursue and analyze background information to facilitate buyers and sellers in their decision-making process.

Not only is it necessary for the broker to develop an extensive network of sources for market information, but it is necessary to know how to manage the information. Knowing which information, how much or how little, in what form the information should be transmitted and when, and to whom it should be channeled, is necessary to maintain productive working relationships. Some clients require daily feedback on market activity, while others prefer weekly updates on the industry trends and outlook.

The brokerage firm is a team of "specialists" organized to serve the sugar buyer's needs. One area usually handles the day-to-day supply and demand outlook-keeping an open hotline to the pulse of the market at all times. This enables the broker to make objective recommendations on pricing to buyers based on their knowledge of market conditions - information which sometimes sugar companies are either unable or unwilling to provide. Brokers are considered independent advisors since they are paid a set fee, regardless of the agreed price between buyers and sellers.

Many firms have a department that concentrates on research and analysis, providing clients with timely Information on how various factors influence the market. Facts and opinions are gathered from sources both in and outside of the sugar industry - from the political positions taken by different sectors in the industry to government objectives, policies and legislation, as well as the impact of economic situations and weather on crops and pricing. The information may be distributed in weekly, monthly, and annual reports, as well as in the form of special projects conducted exclusively at the request of a particular client.

Still a third department in the firm may constantly coordinate and monitor traffic - the departure time of railcar and truckloads of sugar from the supplier to the estimated arrival times at locations designated by the buyer. Brokers not only sell their services of providing information on the sugar market, but a1so their abilities as salesmen of sugar.

Brokers are an invisible sales force representing domestic sugar companies, but they are only invisible as far as their physical presence is concerned at the various headquarters of sugar companies around the country. Brokers provide sellers not only with their market expertise, but with established relationships with potential customers. The broker is able to combine his keen knowledge of the sugar products available from the seller, with his understanding of the individual needs of the industrial buyer. Brokers enable sellers to market their products to a broader purchasing public, eliminating the need to hire a sales force with the salaries, benefits and amenities associated with a permanent staff. The processor knows exactly what each sale will cost him when using a broker, because the pre-determined commission will be paid only when a sale is consummated.

The membership in the Nationa1 Sugar Brokers Association is reflective of the state of sugar consumption in the United States. Its ranks have been cut in half in the past ten years. As the domestic sugar market continues to shrink each year, the brokerage industry has become increasingly more competitive. However, this has kept the industry on its toes and open to new advances in communications and technology to provide the necessary advantage for survival in today's demanding environment.

The ability to communicate effectively - in both oral and written forms - is an essential tool of the broker. While person-to-person contact has always been considered the most advantageous form of conducting business, the widespread geographic coverage of the sugar market - buyers, sellers and brokers - requires alternative means for conducting day-to-day business. New breakthroughs in technology have enabled brokerage firms to better serve their clients. In addition to the telephone and telex, there is now electronic mail sent via computer, and the facsimile machine, which can reproduce entire documents via telephone - to keep clients on both sides informed on the latest, up-to-the-minute happenings in the industry.

The specialized services of a sugar broker are now even more important - as both sugar companies and industrial buyers look to maximize their resources while increasing profits.

By remaining flexible, resourceful and open to new ideas, sugar brokers are able to keep pace with the fluid environment of the sugar and sweetener industry. The dedicated and imaginative broker will survive.

As keystones in the sugar industry, brokers playa vital role. They work for both the buyer and seller. Their job is to bring them together, and hold them together. The broker provides all this at a nominal cost of less than 1 per cent of the price of sugar.

Daniel L. Dyer. Jr. was a Past President of the National Sugar Brokers Association in New York City.