Sugar

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 percent is processed from sugar beets and the remaining 75% is from sugar cane. The trend has been that 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 on the Bolsa de Mercadorias & Futuros (BM&F), Kansai Commodities Exchange (KANEX), the Tokyo Grain Exchange (TGE), the NYSE-LIFFE exchange in London, and the ICE Futures U.S. (ICE) exchange. Options are traded on the BM&F, the TGE, the NYSE-LIFFE and the ICE.

Raw sugar is traded on the ICE Futures U.S. (ICE) exchange while white sugar is traded on the NYSE-LIFFE exchange in London. The most actively traded contract is the No. 11 (World) sugar contract at the ICE. 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 also trades the No. 16 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 NYSE-LIFFE 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 – World sugar prices on the ICE No.11 sugar nearest-futures chart fell sharply the first half of 2010 and fell to a 1-3/4 year low of 13.00 cents per pound in May 2010. Sugar prices fell after (1) the USDA forecasted a +7.9% increase in the 2010-11 global sugar crop, and (2) speculation mounted that India would become a net exporter of sugar for the first time in 3 years. Sugar prices then rallied into year-end and posted a 30-year high of 34.77 cents per pound in December 2010, closing the year up 19% at 32.12 cents pre pound. Sugar prices rallied further in early 2011 and climbed to a fresh 30-year high of 36.08 cents per pound in March 2011. Bullish factors included (1) reduced sugar output in Australia, the world’s third-largest sugar exporter, after floods and cyclones cut its output to a 9-year low of 3.58 MMT and may reduce its sugar output for the next 2-3 years due to the loss of sugarcane plants, and (2) tight sugar supplies in Brazil and India due to adverse weather from a La Nina weather pattern, and (3) the forecast by the International Sugar Organization for a 1.7% increase in global sugar demand that would cut the inventory-to-consumption ratio to a 20-year low of 32%.

Supply – World production of centrifugal (raw) sugar in the 2010-11 marketing year (Oct 1 to Sep 30) rose +5.5% to 161.899 million metric tons, further down from the 2006-07 record high of 164.196 million metric tons. The world’s largest sugar producers in 2010-11 were Brazil with 24.3% of world production, India with 15.9%, and the European Union with 9.1%. U.S. centrifugal sugar production in 2010-11 rose +44.9% to 2.000 million metric tons. World ending stocks in 2010-11 rose +1.2% to 26.457 million metric tons. The stocks/consumption ratio fell -1.4% in 2010-11 to 16,700 metric tons. U.S. production of cane sugar in 2010-11 fell -2.4% to 3.310 million short tons and beet sugar production rose +4.9% yr/yr to 4.800 million short tons.

Demand – World domestic consumption of centrifugal (raw) sugar in 2010-11 rose by +2.7% yr/yr to 158.202 million metric tons, a new record high. U.S. domestic disappearance (consumption) of sugar in 2010-11 fell by -1.0% yr/yr to 11.210 million short tons. U.S. per capita sugar consumption in 2008-09 (latest data) rose +5.9% to 65.79 pounds per year, which is only about two-thirds of the levels seen in the early 1970s.

Trade – World exports of centrifugal sugar in 2010-11 rose slightly to 51.824 million metric tons, a new record high. The world’s largest sugar exporter was Brazil, where exports in 2010-11 rose +10.5% to 26.850 million metric tons, which accounted for 51.8% of total world exports. The next largest exporters are Thailand with 9.1% of world exports and Australia with 7.2%. U.S. sugar exports in 2010-11 fell -28.8% yr/yr to 150,000 short tons, but that is down from the 15-year high of 4221,000 seen in 2006-07. U.S. sugar imports in 2010-11 fell -30.1% yr/yr to 2.058 million short tons, down from the 2-decade high of 3.443 in 2005-06.

Excerpted from the CRB Commodity Yearbook. For more information on CRB products click here

Sugar

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