White Sugar #5 Mar '20 (SWH20)
|Contract||White Sugar #5|
|Tick Size||10 cents per metric tonne ($5.00 per contract)|
|Contract Size||50 metric tonnes|
|Trading Months||Mar, May, Aug, Oct, Dec (H, K, Q, V, Z)|
|Trading Hours||8:45a.m. - 6:30p.m. GMT|
|Value of One Futures Unit||$50|
|Value of One Options Unit||$50|
|Last Trading Day||Sixteen days preceding the first day of the tender period|
The white crystalline substance called "sugar" is the organic chemical compound sucrose, one of several related compounds all known as sugars. These include glucose, dextrose, fructose, and lactose. All sugars are members of the larger group of compounds called carbohydrates and are characterized by a sweet taste. Sucrose is considered a double sugar because it is composed of one molecule of glucose and one molecule of fructose. While sucrose is common in many plants, it occurs in the highest concentration in sugarcane (Saccharum officinarum) and sugar beets (Beta vulgaris). Sugarcane is about 7 to 18 percent sugar by weight while sugar beets are 8 to 22 percent.
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 producers are Florida, Louisiana, Texas, and Hawaii. On a commercial basis, sugarcane is not grown from seeds but from cuttings or pieces of the stalk.
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 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. The trend has been that production of sugar from cane is increasing relative to that produced from beets. The significance of this in that 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.
Sugar futures are traded at the Intercontinental Exchange (ICE), the Bolsa de Mercadorias & Futuros (BM&F), Kansai Commodities Exchange (KANEX), the Tokyo Grain Exchange (TGE), and the London International Financial Futures and Options Exchange (LIFFE).
Raw sugar is traded on the ICE exchange while white sugar is traded on the London International Financial Futures Exchange (LIFFE). The most actively traded contract is the No. 11 (World) sugar contract at the ICE exchange. The No. 11 contract calls for the delivery of 112,000 pounds (50 long tons) of raw cane centrifugal sugar from any of 28 foreign countries of origin and the United States. The ICE exchange also trades the No. 14 sugar contract (Domestic), which calls for the delivery of raw centrifugal cane sugar in the United States. Futures on white sugar are traded on the London International Financial Futures Exchange and call for the delivery of 50 metric tons of white beet sugar, cane crystal sugar, or refined sugar of any origin from the crop current at the time of delivery.
Prices - ICE World No. 11 sugar futures prices (Barchart.com symbol SB) posted the high for 2018 at 15.37 cents per pound in January. Strength in crude oil prices, which climbed to a 4-year high in January, supported sugar prices since higher crude oil prices benefit ethanol prices, which in turn prompts Brazil's sugar mills to divert more cane crushing toward ethanol production, thus reducing sugar supplies. Gains in sugar were limited, however, and sugar prices declined into Q3 on a global glut of sugar supplies after researcher Green Pool Commodity Specialists forecasted a global 2017/18 sugar surplus of 10.4 MMT, a 5-year high. Increased sugar production in India, the world's second-largest producer, also weighed on prices after the Indian Sugar Mills Association in May raised its India 2017/18 sugar production estimate to a record 31.5 MMT. That prompted Green Pool to hike its global 2017/18 global sugar surplus estimate to a record 18.4 MMT. Sugar prices plunged to an 11-year low of 9.83 cents per pound in September after the Brazilian real tumbled to a 3-1/4 year low against the dollar. The weaker real encouraged Brazil's sugar producers to boost sugar exports, which are priced in dollars. Sugar prices recovered into October on signs of lower output from Brazil, the world's biggest producer, after Unica predicted that Brazil's Center South 2018/19 sugar production would fall -28% yr/yr to 26 MMT. The upside for sugar prices was limited after the USDA's FAS in November projected a record 2017/18 global sugar surplus of 10.73 MMT and record global 2017/18 sugar production of 184.95 MMT. Sugar prices finished 2018 down -20.6% yr/yr at 12.03 cents per pound.
Supply - World production of centrifugal (raw) sugar in the 2018/19 marketing year (Oct 1 to Sep 30) is forecasted to fall -4.5% yr/yr to 185.886 million metric tons, down from last year's record high. The world's largest sugar producers in 2018/19 are expected to be India with 9.3% of world production, Brazil with 16.5%, and the European Union with 10.%. U.S. sugar production in 2018/19 is expected to fall 3.0% yr/yr to 8.178 million metric tons, down from last year's record high. World ending stocks in 2017/18 rose +22.0% yr/yr to 51.529 million metric ton, a record high. The stocks/consumption ratio in 2017/18 was 30.0%. U.S. production of cane sugar in 2017/18 is expected to rise +1.8% to 3.912 million short tons and beet sugar production is expected to rise +0.4% yr/yr to 5.017 million short tons.
Demand - World domestic consumption of centrifugal (raw) sugar in 2017/18 fell by -0.2% yr/yr to 171.559, down slightly from the 2016/17 record high of 171.867 million metric tons. U.S. domestic disappearance (consumption) of sugar in 2017/18 rose +1.8% yr/yr to 12.703 million short tons. U.S. per capita sugar consumption in 2014/15 rose +0.6% yr/yr to 68.39 pounds per year, which was only about two-thirds of the levels seen in the early 1970s.
Trade - World exports of centrifugal sugar in 2018/19 are expected to fall -9.4% yr/yr to 57.880 million metric tons, down from last year's record high of 63.876. The world's largest sugar exporter in 2018/19 will continue to be Brazil, with 33.9% of world exports, even though its exports are expected to fall -30.5% yr/yr to 19,600 million metric tons. The next largest exporters are expected to be Thailand with 19.9% of world exports, India with 6.9% and Australia with 6.7%. U.S. sugar exports in 2017/18 fell -80.0% yr/yr to 25,000 short tons, which is down from the 3-decade high of 422,000 seen in 2006-07. U.S. sugar imports in 2018/19 are expected to fall -14.5% yr/yr to 2.541 million metric tons.
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