Wednesday, December 19, 2018
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sugar

market spotlight – sugar

sugarcane is a member of the grass family and is a perennial. sugarcane is cultivated in tropical and subtropical regions around the world roughly between the tropics of cancer and capricorn. it grows best in hot, wet climates where there is heavy rainfall followed by a dry season. the largest cane producing states in the u.s. are florida, louisiana, texas, and hawaii. the largest cane producing countries are brazil, india, china, and thailand.

sugar beets, which are produced in temperate or colder climates, are annuals grown from seeds. sugar beets do best with moderate temperatures and evenly distributed rainfall. the beets are planted in the spring and harvested in the fall. the sugar is contained in the root of the beet, but the sugars from beets and cane are identical. sugar beet production takes place mostly in europe, the u.s., china, and japan. the largest sugar beet producing states in the u.s. are minnesota, idaho, north dakota, and michigan. sugar beets are refined to yield white sugar and very little raw sugar is produced.

sugar beets and sugarcane are produced in over 100 countries around the world. of all the sugar produced, about 25% is processed from sugar beets and the remaining 75% is from sugar cane. sugarcane is a perennial plant while the sugar beet is an annual, and due to the longer production cycle, sugarcane production and the sugar processed from that cane, may not be quite as responsive to changes in price.

raw sugar (no. 11 world) is traded on the intercontinental exchange (ice) while white sugar (no. 16 domestic) is traded on the nyse liffe exchange in london. the most actively traded futures contract is the no. 11 sugar at the ice exchange.

the no. 11 sugar futures contract trades electronically from 2:30 am et to 2:00 pm et, monday through friday.

one no. 11 sugar futures contract size is 112,000 pounds.

the price increment is quoted in cents and hundredths of a cent per pound to two decimal points. the last traded price (september 24th, 2012) for march 2013 sugar no. 11 futures was 20.27 or $.2027 per pound. the minimum price movement or “tick” is 1/100 of a cent per pound or $11.20 per contract. the next price after 20.27 upward is 20.28, followed by 20.29. therefore a one point move, from 20.27 to 21.27, would be $1,120.

the performance bond or initial margin requirement to initiate one futures contract is 6.78% or $1,540 (as of september 18, 2012) to control that futures contract going forward the maintenance margin becomes 6.17% or $1,400 (as of september 18, 2012).

there is no daily price limit.

the futures contract month listings are march (h), may (k), july (n), and october (v).

sugar contracts are physically delivered. the futures contract’s first notice day (fnd) is the first business day after last trading day. the march 2013 sugar futures contract fnd is march 1, 2013 for example. the last notice day is the first business day after last trading day. the futures contract’s last trading day (ltd) is the last business day of the month preceding the delivery month. the march 2013 sugar futures contract ltd is february 28, 2013 for example.

weather should be watched in brazil, india and the united states. heavy rains, especially around harvest time, can cause crop losses to sugarcane, which may cause the price of sugar futures to move higher. the increased production of ethanol from sugar in brazil is a positive factor for prices to move higher over the long-term. if the price of crude oil moves higher, that should also support sugar futures prices.

use stop loss and target orders as this particular market begins trading early in the am. in addition, there can be potential large trading ranges without a daily price limit.

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