White Sugar #5 Dec '19 (SWZ19)
|Contract||White Sugar #5|
|Tick Size||10 cents per metric tonne ($5.00 per contract)|
|Contract Size||50 metric tonnes|
|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 the 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 ICE Futures U.S. exchange , the Bolsa de Mercadorias & Futuros (BM&F), Kansai Commodities Exchange (KANEX), the Tokyo Grain Exchange (TGE), and the ICE Futures Europe exchange.
Raw sugar is traded on the ICE Futures U.S. exchange, while white sugar is traded on the ICE Futures Europe exchange. 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) drifted lower into Q3-2019 and posted the low for 2019 at 11.68 cents per pound in September. Persistent weakness in the Brazilian real against the dollar weighed on sugar prices as the real fell to new record lows against the dollar for most of the year. A weaker real encourages Brazil's sugar producers to boost exports, thus increasing sugar supplies. Robust global sugar production also weighed on sugar prices as the International Sugar Organization (ISO) projected that global 2018/19 sugar production would climb +0.6% yr/yr to a record 185.MMT. In addition, India, the world's second-largest sugar producer, was considering hiking its 2019/20 sugar exports to 7 MMT from 3.8 MMT in 2018/19 to bring down its 2018/19 sugar stockpiles that had surged to a record 14.2 MMT. Sugar prices then trended higher from September 2019 into year-end on expectations of tighter future global supplies. The ISO forecast that the global sugar balance in 2019/20 will tighten to a -9.4 MMT deficit, the biggest deficit in 11 years, from a +1.7 MMT surplus seen in 2018/19 as sugar production tumbled in Brazil, India, and Thailand. Data from Conab showed Brazil 2018/19 sugar production dropped -17.2% y/y to an 11-year low of 31.4 MMT. India's Sugar Mills Association forecasted that India 2019/20 sugar production will fall -15% y/y to a 3-year low of 28 MT due to drought and the delayed monsoon season. Thailand 2019/20 sugar production is projected to fall -32.5% y/y to 3-year low of 9.8 MMT due to the worst drought in Thailand in 40 years. Sugar prices finished 2019 up +11.6% yr/yr at 13.42 cents per pound.
Supply - World production of centrifugal (raw) sugar in the 2019/20 marketing year (Oct 1 to Sep 30) is expected to fall -3.2% yr/yr to 174.140 million metric tons. The world's largest sugar producers in 2019/20 are expected to be Brazil with 16.9% of world production, India with 16.8%, and the European Union with 10.3%. U.S. sugar production in 2019/20 is expected to fall -3.2% yr/yr to 8.159 million metric tons. U.S. production of cane sugar in 2019/20 is expected to rise +2.5% to 4.129 million short tons, and beet sugar production is expected to rise +1.0% yr/yr to 5.005 million short tons. World ending stocks in 2019/20 are expected to rise +5.3% yr/yr to a record high of 55.501 million metric tons.
Demand - World domestic consumption of centrifugal (raw) sugar in 2019/20 is expected to rise +0.8% yr/yr to a new record high of 174.684 million metric tons. U.S. domestic disappearance (consumption) of sugar in 2019/20 is expected to be virtually unchanged yr/yr at 12.340 million short tons.
Trade - World exports of centrifugal sugar in 2019/20 are expected to fall -5.3% yr/yr to 54.856 million metric tons, down from the previous year's record high of 64.262 million metric tons. The world's largest sugar exporters are Brazil, Thailand, and India.
U.S. sugar exports in 2019/20 are expected to be unchanged yr/yr at 25,000 short tons, which is down from the 3-decade high of 422,000 seen in 2006/07. U.S. sugar imports in 2019/20 are expected to fall -5.2% yr/yr to 2.816 million metric tons.
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