It is equally obvious that the differential should approximate the freight rate between Chicago and the Seaboard, where the refiners are located, with allowance also for the cash discount. When the markets are in line such is the case. Conversely, when the differential is higher or lower, the markets are out of line.
Therefore, in order to tell whether the markets are out of line, or to what extent, it is necessary to determine on a differential to represent the normal difference between the two markets. There is no one figure, however, that will satisfy all conditions at all times, for the reason that there are various freight rates between the Seaboard and Chicago. It is inaccurate, for instance, to use 63¢ as the basis for the normal differential. The 63¢ rate is one rate—the all-rail freight rate from New York to Chicago.
Other important routes and rates are as follows:
| Routing: | Freight Rate: |
| New Orleans—Chicago (barge and rail) | $0.50[1] |
| New York—Chicago (rail and lake) | .58 |
| New Orleans—Chicago (all rail) | .60 |
| Philadelphia—Chicago (all rail) | .61 |
| New York—Chicago (all rail) | .63 |
| Savannah—Chicago (all rail) | .63 |
| Boston—Chicago (all rail) | .63 |
After a study of the amounts of sugar shipped over these various routes we have arrived at an arbitrary figure to represent the normal differential between refiners' prices and exchange quotations. We believe that 57¢ will serve as a safe basis for calculation, but 58¢ or 59¢ might be equally—or more—accurate. In fact, anyone is entitled to an opinion. 57¢ is our opinion. It is not an average of freight rates, but is an arbitrary figure.
When the markets are in line, using 57¢ as a basis for calculation, 2% should be deducted from refiners' prices, and 57¢ added to determine what Exchange quotation should be. Conversely, 57¢ should be deducted from Exchange quotations and 2% added to determine what refiners' prices should be.
If you are willing to accept 57¢ as a safe figure, you may find the following chart useful in determining the condition of the market:
ARE REFINERS' PRICES AND EXCHANGE QUOTATIONS IN LINE?
Based on a 57¢ differential and 2% cash discount
|
When Refiners' Prices Are |
Exchange Quotations Should Be |
When Refiners' Prices Are |
Exchange Quotations Should Be |
| 4¢ | 4.49 | 7.00 | 7.43 |
| 4.05 | 4.54 | 7.05 | 7.48 |
| 4.10 | 4.59 | 7.10 | 7.53 |
| 4.15 | 4.64 | 7.15 | 7.58 |
| 4.20 | 4.69 | 7.20 | 7.63 |
| 4.25 | 4.73 | 7.25 | 7.67 |
| 4.30 | 4.78 | 7.30 | 7.72 |
| 4.35 | 4.83 | 7.35 | 7.77 |
| 4.40 | 4.88 | 7.40 | 7.82 |
| 4.45 | 4.93 | 7.45 | 7.87 |
| 4.50 | 4.98 | 7.50 | 7.92 |
| 4.55 | 5.03 | 7.55 | 7.97 |
| 4.60 | 5.08 | 7.60 | 8.02 |
| 4.65 | 5.13 | 7.65 | 8.07 |
| 4.70 | 5.18 | 7.70 | 8.12 |
| 4.75 | 5.22 | 7.75 | 8.16 |
| 4.80 | 5.27 | 7.80 | 8.21 |
| 4.85 | 5.32 | 7.85 | 8.26 |
| 4.90 | 5.37 | 7.90 | 8.31 |
| 4.95 | 5.42 | 7.95 | 8.36 |
| 5.00 | 5.47 | 8.00 | 8.41 |
| 5.05 | 5.52 | 8.05 | 8.46 |
| 5.10 | 5.57 | 8.10 | 8.51 |
| 5.15 | 5.62 | 8.15 | 8.56 |
| 5.20 | 5.67 | 8.20 | 8.61 |
| 5.25 | 5.71 | 8.25 | 8.65 |
| 5.30 | 5.76 | 8.30 | 8.70 |
| 5.35 | 5.81 | 8.35 | 8.75 |
| 5.40 | 5.86 | 8.40 | 8.80 |
| 5.45 | 5.91 | 8.45 | 8.85 |
| 5.50 | 5.96 | 8.50 | 8.90 |
| 5.55 | 6.01 | 8.55 | 8.95 |
| 5.60 | 6.06 | 8.60 | 9.00 |
| 5.65 | 6.11 | 8.65 | 9.05 |
| 5.70 | 6.16 | 8.70 | 9.10 |
| 5.75 | 6.20 | 8.75 | 9.14 |
| 5.80 | 6.25 | 8.80 | 9.19 |
| 5.85 | 6.30 | 8.85 | 9.24 |
| 5.90 | 6.35 | 8.90 | 9.29 |
| 5.95 | 6.40 | 8.95 | 9.34 |
| 6.00 | 6.45 | 9.00 | 9.39 |
| 6.05 | 6.50 | 9.05 | 9.44 |
| 6.10 | 6.55 | 9.10 | 9.49 |
| 6.15 | 6.60 | 9.15 | 9.54 |
| 6.20 | 6.65 | 9.20 | 9.59 |
| 6.25 | 6.69 | 9.25 | 9.63 |
| 6.30 | 6.74 | 9.30 | 9.68 |
| 6.35 | 6.79 | 9.35 | 9.73 |
| 6.40 | 6.84 | 9.40 | 9.78 |
| 6.45 | 6.89 | 9.45 | 9.83 |
| 6.50 | 6.94 | 9.50 | 9.88 |
| 6.55 | 6.99 | 9.55 | 9.93 |
| 6.60 | 7.04 | 9.60 | 9.98 |
| 6.65 | 7.09 | 9.65 | 10.03 |
| 6.70 | 7.14 | 9.70 | 10.08 |
| 6.75 | 7.18 | 9.75 | 10.12 |
| 6.80 | 7.23 | 9.80 | 10.17 |
| 6.85 | 7.28 | 9.85 | 10.22 |
| 6.90 | 7.33 | 9.90 | 10.27 |
| 6.95 | 7.38 | 9.95 | 10.32 |
| 10.00 | 10.37 |