Sugar trades in two interconnected markets: physical (OTC) where actual sugar changes hands, and futures where standardized contracts trade on exchanges.
Two Markets
Aspect
Physical (OTC)
Futures (Exchange)
Product
Actual sugar
Standardized contracts
Contracts
Negotiated
Exchange-traded
Settlement
Physical delivery
Cash or physical
Counterparty
Direct exposure
Clearinghouse
Volume
~65 MMT/year
~3,000+ MMT equiv
Physical Market
How It Works
Physical sugar trades through:
Direct negotiation between buyers/sellers
Broker intermediation for anonymity
Tenders for large institutional purchases
Physical Contract Elements
Element
Example
Commodity
VHP 99.3° Pol, ICUMSA 1000
Quantity
25,000 MT ±5%
Price
No.11 Mar + 25 pts
Incoterm
FOB Santos
Shipment
Feb 1-28, 2025
Payment
L/C at sight
Pricing Methods
Method
Description
Flat Price
Fixed USD/MT
Basis
Futures + premium/discount
Index
Published index reference
Example Pricing
Brazilian VHP, FOB Santos, March Shipment
Price = ICE No.11 March + 35 points
If No.11 March = 21.50 c/lb
Physical = 21.50 + 0.35 = 21.85 c/lb
In USD/MT: 21.85 × 22.0462 = $481.71/MT
Futures Markets
Primary Exchanges
Exchange
Contracts
Hours (Local)
ICE US
No.11, No.16
03:30-13:00 ET
ICE Europe
No.5 (White)
08:45-17:55 GMT
B3 (Brazil)
Sugar, Ethanol
09:00-16:20 BRT
Why Futures Exist
Price Discovery — Transparent prices
Risk Transfer — Hedging for physicals
Liquidity — Easy entry/exit
Counterparty Protection — Clearinghouse
ICE Sugar No.11
The global benchmark for raw sugar.
Contract Specs
Spec
Value
Symbol
SB
Trading Unit
112,000 lbs (50.8 MT)
Price Quote
US cents per pound
Tick Size
0.01 c/lb ($11.20)
Contract Months
Mar, May, Jul, Oct
Delivery
FOB stowed vessel
Quality
Min 96° polarization
Contract Months
Month
Code
Timing
March
H
Brazil start
May
K
Brazil peak
July
N
Brazil end
October
V
Asia start
Position Sizing
Exposure
Contracts
10,000 MT
197
25,000 MT
492
50,000 MT
984
Formula: Contracts = MT ÷ 50.8
ICE White Sugar No.5
Benchmark for refined sugar.
Contract Specs
Spec
Value
Symbol
QW
Trading Unit
50 MT
Price Quote
USD per MT
Tick Size
$0.10/MT ($5.00)
Contract Months
Mar, May, Aug, Oct, Dec
Quality
ICUMSA 45 max
White Premium
The spread between No.5 and No.11:
White Premium = No.5 ($/MT) - [No.11 (c/lb) × 22.0462]
Example:
No.5 = $550/MT
No.11 = 22.00 c/lb = $485/MT
Premium = $65/MT
Typical Range: $50-120/MT
Spread Trading
Calendar Spreads
Trading price difference between months:
Market
Spread
Interpretation
Carry
Far > Near
Storage costs
Inverse
Near > Far
Tight supply
Common Spreads
Spread
Months
Driver
H-K
Mar-May
Brazil harvest
K-N
May-Jul
Mid-season
N-V
Jul-Oct
Hemisphere switch
Basis
Basis = Physical Price - Futures Price
Components
Component
Example
Quality
+15 pts (VHP premium)
Location
+10 pts (Santos)
Timing
+5 pts (prompt)
Market
+10 pts (tight supply)
Total
+40 pts
Convergence
Physical and futures prices converge at expiration: