Reports CTRM for Agricultural and Soft Commodities | Page 34
CTRM for Ags & Softs
Once this is done, the sugar liquor is ready for sugar production except that it is very dilute. The next stage of the process
is to evaporate the juice in a multi-stage evaporator.
In the last stage of processing, the syrup is placed into a very large pan, typically holding 60 tons or more of sugar syrup
where even more water is boiled off until sugar crystals to grow. Once the crystals have grown, the resulting mixture of
crystals and remaining liquor is spun in centrifuges to separate the two. The crystals are then given a final dry with hot air
before being packed and/or stored ready for dispatch.
The final sugar is white and ready for use, whether in the kitchen or by an industrial user such as a soft drink
manufacturer. A byproduct of the process is called beet molasses, and this is usually turned into a cattle food or is sent to
a fermentation plant such as a distillery where alcohol is made.
Sugar Trading
The futures contract for sugar is traded at the Intercontinental Exchange (ICE), Brazilian Mercantile and Futures
Exchange (BF&M), Kansai Commodities Exchange (KEX), Multi Commodity Exchange (MCX), National Commodity
Exchange Limited (NCEL), National Commodities and Derivatives Exchange (NCDEX) and Zhengzou Commodity (CZCE)
Exchange. Sugar options are also offered as several exchanges.The most important exchange is the New York
Mercantile Exchange (NYMEX), and sugar prices at this exchange function as a benchmark for sugar prices.
At the NYMEX, they trade sugar futures No. 11 for raw sugar; on ICE they trade sugar futures No. 16 for raw sugar; while
at NYSE Euronext it is sugar futures contract No. 407 for either white beet, cane crystal or refined sugar; and finally, on
the Olsa de Mercadorias&Futuros, they trade sugar futures contracts for cane crystal sugar. These contracts are mainly
based on the origin of the product and the area in which they are being
traded.
‘CTRM nowadays require flexibility
The sugar commodity market can be impacted by a number of factors.
and self-sufficiency.’
Sugar remains one of the most heavily subsidized commodities worldwide,
and changing government policies can greatly impact the sugar trade. Sugar
Jan van den Brom - Agiboo
production is subsidized and tariffed all over the world. The real price of
sugar is actually unknown. In a truly competitive trading environment, sugar
prices might be significantly less. The demand for ethanol is also an important factor to consider when attempting to
understand future sugar commodity price formation, as biofuels become more appealing to buyers when the price
of oil rises. Weather, too, can greatly influence the supply of sugar. Finally, increasing awareness of the health issues
associated with too much sugar in the diet is also having an impact on demand and substitution products.
Sugar is a complex commodity market. It is traded at different markets and traders; merchandisers and consumers all use
different specifications. There are four sugar contracts, and also raw sugar is priced based on terminal markets, but purity
or the Polarization Premium is an important aspect of sugar price. It is essential for the various types of players in the
market to be able to manage, trade and arbitrage on and between these markets based on the difference between raw
and white sugar prices. Additional complexity results from the need of the larger sugar consumers to set their own
specifications for sugar and that sugar is increasingly containerized having traditionally been a bulk product.
Types of Entities Involved in Sugar Trading
Producers
Agents
Brokers
Banks
Insurers
Traders and Merchants
Inspectors
Exporters/Importers
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Processors/Refiners
End users – Food and
Beverage, Ethanol
producers, etc.
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