Trading ICE Raw Sugar Futures, #11 Benchmark And #16
To gain exposure to this key soft commodity, one route is through ICE Raw Sugar Futures traded on the ICE Futures US platform.
Sugar cane makes up over three quarters of all globally produced sugar and ICE Futures US provides traders, producers and end users two futures contracts for the purposes of commodity trading or as a hedging instrument.
Sugar #11 futures is the world’s most heavily traded sugar futures contract and is in fact the global benchmark for sugar commodity trading.
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The other contract traded on this ICE commodity platform is #16 futures, which relates to sugar produced within the US.
Sugar #11 Futures
Electronic trading is available for this contract at two locations, namely New York and London.
New York opens at 0230 and closes at 1515, while London opens for business at 0730 and closes at 2015.
Contract months are January, March, May, July and October, and settlement is by physical delivery, Free on board the receiver’s vessel. The raw sugar cane is delivered to a port in the country of origin, or from a nearby export port if the country of origin is landlocked.
Margins: For traders/non-members: Initial: $1,260; Maintenance: $900 For members or hedgers: Initial: $900; Maintenance: $900
Deliverable growths are from among the following countries: Argentina, Australia, Barbados, Belize, Brazil, Costa Rica, Ecuador, Fiji, Guatemala, Honduras, Jamaica, Malawi, Mauritius, Nicaragua, Peru, Philippines, South Africa, Thailand, USA and Zimbabwe.
Contract prices must move by a minimum of 0.01c per lb. (or $11.20 per contract), and there is no limit on price movement.
The ICE Raw Sugar futures contract attaches importance to the quality of the raw sugar cane, which must have been centrifuged and have an average polarisation of 96 degrees.
Last trading day for the March, May July and October contracts is the last business day of the month prior to delivery month. While for January it is the second business day before the 24th day of the previous calendar month.
This is a new contract introduced from 26 September 2008 on the ICE Futures US platform as a vehicle for commodity traders and hedgers of raw sugar prices for US produced sugar cane.
#16 replaces the #14 raw sugar futures contract for delivery of sugar within the US, and it has a higher quality threshold than #14.
The new contract also has an incentive of higher premiums for delivery of higher quality raw sugar. Conversely, the discounts will be larger for the lower quality commodity.
The #16 contract is settled by physical delivery of raw sugar grown in the US and delivered by a vessel at one of the five US refinery ports, Baltimore, New Orleans, Savannah, Galveston and New York.
Contract symbol: SF
Contract size: 112,000lbs. (50 long tons)
Contract months: January, March, May, July, September, November Minimum price movement: 0.01c per lb. ($11.20/contract)
To maintain a high quality standard, the raw cane sugar should have been centrifuged and must have a polarisation of around 96 degrees. The last trading day for this contract is the 8th calendar day of the month before delivery month.
As well as gaining exposure to this soft commodity through the ICE Futures US platform, traders can also trade raw sugar futures using LIFFE CONNECT platform, part of the NYSE Euronext group.
With the strong likelihood of continuous growth in global demand for all commodities, not least food including raw sugar, traders can look forward to interesting trading opportunities ahead in this area.
The ICE raw sugar futures contracts, #11 and #16, offer an ideal platform to achieve potential profits in the months and years ahead.
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