Soft Futures – Sugar

The future sugar contracts are unique in some aspects when compared to other futures markets.  There are currently two future sugar contracts: the sugar No. 11 and the sugar No. 14.  These contracts actually have the exact same specifications.  We’ll look at these contract specifications first and then look at their differences.

These specifications are for both the sugar No. 11 and sugar No. 14 contracts, but the interest lies in the differences.  Delivery of the sugar No. 11 contract can come from most places in the world that can produce and export sugar.  This is also true for the sugar No. 14 contract, but shipments delivered from sources outside of the U.S. for this contract are imposed with a duty charge.  The purpose of this is to provide U.S. commercial users of the future sugar market a better tool for hedging.  These hedgers include farmers, millers and refiners.  As a result of the imposed duties, the sugar No. 14 contract trades at a premium to the No. 11 contract.  The futures industry is constantly undergoing innovation and growth.  The sugar No. 14 contract is a representation of just that.

The August 10 expiration of the September 2009 sugar No. 14 contract will be its last day of trading.  It is being replaced by the sugar No. 16 contract whose trading commences on September 26, 2009.  Again, the contract specifications are identical to the No. 11 and No. 14 contracts.  The new future sugar contract is believed to be more accurately priced at different levels of deliverable quality than its predecessor the No. 14 contract.  Higher premiums will be paid for better stocks and discounts will be given to buyers of lower quality stocks.  This will allow hedgers and other commercial interests to conduct their business with a higher degree of precision.  These contract specifications of the future sugar market are important as they effect the fundamentals of the market place.  This is important information to those who may want to trade sugar futures markets.

(ICE Home Page: Products: Agriculture: Sugar: Sugar No. 11 Futures, Sugar No. 14 Futures, Sugar No. 16 Futures)

Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not indicative of future results.

 

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