As one of the world’s most widely traded commodities, the trading of sugar can be a complicated endeavor, with natural phenomena, political concerns, and other factors such as fuel prices all impacting heavily on the market. Much sugar is traded on futures markets, by which supplies can be secured years ahead of time. This is advantageous for large corporate entities which require secured ongoing sugar supplies. For those requiring more flexibility, or who enjoy playing the market, spot trading provides the ability to purchase sugar when the timing is right, or to take advantage of short term dips in the market.
Sugar Spot Trading
Spot trading involves purchasing a currency or commodity (in this case, sugar), at the current market rate for immediate delivery. Unlike other forms of sugar trading, in which shipments are often sent over a period of many months, in spot trading, sugar is reserved for the soonest possible delivery and payment is made in relatively short order. Sugar spot trading therefore involves relatively small amounts of product which have already been produced, unlike traditional sugar trading which quite often concerns sugar that has yet to be grown, yet alone refined.
2008/2009 Trading Trends
Spot trading is on the rise amidst one of the largest global sugar surpluses in recent history. It is estimated that Brazil and India alone will produce a combined amount of around 60 million tons in the 2008/2009 period, and a global sugar surplus of around eleven million tons is predicted for the same period. For this reason, sugar prices are in something of a depression at the present time, though shipping costs, rising on the back of increased fuel prices could see export prices rising into the future.
A quick breakdown of major sugar exporting countries goes thus:
Brazil 20.9 MT
Thailand 5.8 MT
India 4 MT
Australia 3.9 MT
SADC (Southern African Development Community) 2.3 MT
Guatemala 1.9 MT
Europe 1.2 MT
Brazil retains its title as the largest exporter of sugar, exporting roughly two thirds of its total production. Though India’s production continues to climb to comparable levels with Brazil, exports have been limited due to fears that the sugar market could become saturated and prices could fall below profitable levels if large amounts of Indian sugar were to be exported. In 2007, India’s exports were a mere 1.34 million tons, but this number is set to climb in the coming years as India increasingly seeks export markets for its sugar.
Sugar Trading Tarrifs
Global sugar trading is further made interesting by the many countries which place tarrifs on imported sugar in order to provide stimulation to local sugar producers. It is not uncommon for governments to subsidize local sugar production in order to encourage local production and consumption, even during times when it would ostensibly make sense to take advantage of lower prices available on the export market.
Some countries use their sugar tarrifs to restrict the product of certain countries, whilst encouraging others. For instance, the United States has no tarrifs on sugar imported from third world nations, a policy which aims to stimulate economic growth in those regions.
Sugar Commodities Exchange
Sugar is traded on several commodities exchanges. Some of the more popular exchanges include: Intercontinental Commodities Exchange (ICE) – formerly the NYBOT, the London Futures Exchange (LIFFE), Commodity Exchange Inc (COMEX), and the Coffee, Sugar, and Cocoa Exchange (CSCE).
Anyone with a vested interest in sugar trading would be well advised to subscribe to these markets, as they are an irreplaceable source of data not just on current market value, but also on trends which can have a strong impact on future trading decisions.
Direct Sugar Export
Nowadays sugar importers often buy directly from the sellers (not the market). We work with several US and EU hedge funds who own Brazilian sugar allocations in large quantities. We also source sugar directly from a Brazilian jointly owned commercial enterprise, which is in control of over 200 sugar mills. Lastly, we also work with individual Brazilian sugar mills. Because of that, we are able to fill an order of any reasonable size, starting with the minimum 12.500 metric tons to multi million ton orders. Please contact us through the below form and let us know your exact requirements. We will get back to you with sugar availability and price quotation shortly