It’s important to understand the different types of sugar futures contracts before learning how to trade sugar futures.
The world’s raw sugar trade is benchmarked by the Sugar No. 11 (/SB) futures contract. The /SB contract prices the actual delivery or raw cane sugar. ‘No 11’ actually refers to the way that the shipping costs are handled between the buyer/seller of the contract. Sugar No 11 is sold as FOB (free on board), meaning that the seller will pay to ship the raw sugar to the port and is responsible for the loading costs. The only thing the buyer has to pay for is the unloading costs.
There is also a sugar futures contract (one that cannot be traded in the U.S.) that is used as the global benchmark for the pricing of physical white sugar (refined sugar) - /W. The white sugar futures contract is actively traded internationally by sugar millers, sugar refiners, and end-users (the manufacturers), as well as by managed funds and institutional/short-term investors. /W is a refined sugar derived from sugar beets and sugarcane.
Sugar cane is the world’s primary source of sugar with a 78% market share. In 2014, worldwide sugar production reached a record 161 million tons. Brazil led the way with 33 million tons of sugar and India came in at a close second with 27 million tons. The EU (European Union) came in third at a production level of 16 million tons.
Sugar (/SB) Specs:
Contract Size (leverage) - 112,000 lbs
Current Price - $11.20
Notional Value -$12,544 * = ($.1120 x 112,000)
Tick Size - 1/100 cent/lb. ($11.20/tick)
Sugar No. 11 has contracts available to trade with a March, May, July, and October expiration. Sugar No 11 trading hours are limited and are from Monday-Friday at 2:30am CST to 12:00pm CST.
Sugar cane grows best in hot weather climates which is why the major growing countries are Brazil, south Asia, the Caribbean basin and southern US. Sugar beets are actually grown in cooler, more temperate zones like the northern Great Plains, France, and Germany.
The sugar production process has actually undergone very little change since the 14th century. Sugar that is stored in the cane stalk or the beetroot is separated from the rest of the plant material.
To process sugar cane, the juice from the plant is extracted and then the syrup is crystallized. The raw sugar is produced by ‘spinning’ the crystals and then raw sugar is sent to a refinery for the final processing/packaging. Beet Sugar is processed in one continuous flow without the raw sugar stage.
Both sugarcane and sugar beets must be processed in raw sugar shortly after being harvested, otherwise, their sugar content drops immediately.
A recent innovation is the use of sugar cane as feedstock for ethanol distillation. Sugar cane is by far and away the most efficient converter of solar energy into usable plant carbohydrates - it beats corn (at 1%) by a lot (8%). Sugar as a ethanol source has only recently become an important part of the sugar trade.
The price of sugar can be converted to the equivalent price of ethanol. This is achieved by multiplying the price/lb of sugar by .1477, giving us the price/gallon of ethanol.
Because ethanol is linked to the price of gasoline, one would assume that there would be an increased correlation between sugar, corn, ethanol and gasoline. In recent years, these correlations have existed and the rolling 6-month correlations have reached unprecedented levels. When the US tariff on imports from Brazil was lifted in 2011, the correlation between sugar that’s in your food and the gas that’s in your car has grown tighter than ever.
To learn more about sugar correlations, check out part 2 (LINK: http://ontt.tv/1ISS37a).
Strategies: N/A
Products Discussed In This Episode: /SB
*Values subject to change based on where the market is at
This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.