Sugar was first thought to have been produced in Polynesia and later India, around 500 BC. Brazil is traditionally the world’s largest sugar producer and exporter.
Sugar futures are an outright contract between a buyer and a seller that industry participants, such as sugar producers, refiners, retailers, exporters and importers, can use to manage price risk.
Sugar is a carbohydrate named as Sucrose that occurs naturally in every fruit and vegetable. It is a major product of photosynthesis, the process by which plants transform the sun's energy into food. Globally Sugarcane and sugar beet are the major source of sugar. Sugar is one of the common household items that are used as sweetening agent in various household as well as industrial preparations. Sugar- the universal sweetener is consumed in large quantities around the world, with per capita consumption in countries such as Mexico and Brazil touching high of 50kgs/year. Sugar is produced in around 100 countries around the world. The main producers of sugar are Brazil, India, European Union and China, but due to high internal consumption in India, there is hardly anything left for exports. So even if it is the second largest sugar producing country, it doesn’t figure among the largest exporters. Sugarcane and sugar production in India typically follow a 6 to 8 year cycle, wherein 3 to 4 years of higher production are followed by 2 to 3 years of lower production. After two consecutive years of declining sugar production (2007/08 and 2008/09), production surged in 2009/10, and is set to gain strongly in the upcoming 2010/11. Globally, Demand as an alternative source of energy is also on a rise. Global ScenarioWorld sugar production for the 2010/11 marketing year is forecast at 164 million tons, raw value, up 12 million from the revised 2009/10 estimate. Consumption forecast is at a record 158 million tons, up 4 million from a year earlier. Exports forecast are at record 54 million tons, up 3 million; and ending stocks are forecasted at 27 million tons, up 500,000 tons. Brazil is the largest producer and exporter of sugar in the World. India is the largest consumer of sugar. Brazil accounts for 23 % of world production, and Asia accounts for 37 %. Brazil accounts for approximately 48 % of World sugar exports with annual exports of 24.3 million tons in 2009/10. Middle East followed by Africa is the largest importers of Sugar.
Factors influencing Sugar trading
Average level of consumption and exports during the past few years.
Estimated output based on the acreage and weather conditions and pest infestation etc. of India as well other major countries producing sugar country especially Brazil.
Leftover stocks from the previous year’s production after meeting the demand.
Extent to which the crushing of Sugarcane is carried by the Sugar mills in domestic market.
Extent of area sown under the crop.
ICE Sugar No. 11 Futures price movement, LIFFE Sugar price movement and estimates released by domestic and global agencies.
In case of Sugar, the traders need to know the details of important sources and destinations of the external trade.
Any change in government policy relating to the crops such as Cane price, change in tariff, Cess and base prices of externally traded goods will have a direct impact on the respective commodity prices.
Direct procurement by the government agencies and storage in warehouses.
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