The Learn About Futures Insider for October 27, 2011: Sugar (Part 3)

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Part 2:
The Learn About Futures Insider for October 27, 2011: Sugar (Part 2)

Recent world sugar imports and exports are shown in the charts below:

***data courtesy USDA

***data courtesy USDA

Price highlights for this market include:

* Sugar prices in the early 20th century fluctuated wildly, influenced by politics, supply, and demand. In 1960, preferential prices were set for purchases from Cuba at around 5 cents per pound. This changed with the political landscape of the time, and speculation about embargoes helped fuel price volatility. Over the next few years, a temporary sugar shortage caused prices to spike above 12 cents a pound, but by 1964 they had dropped back towards 4 cents a pound.
* Sugar was reportedly trading around 2-3 cents a pound by 1970. In 1974, two major sugar producers - Poland and the Philippines - suspended sugar exports due to poor harvests and prices soared to 66 cents per pound. This led to widespread consumer boycotts in the US. Higher production helped precipitate a price retreat through 1975. By the end of the 1970s, prices would be back below 10 cents a pound.
* Forecasts for tighter world supplies in 1980 caused another price spike, this time above 45 cents per pound. 1980 also brought the news from major soda manufacturers like Coca-cola that they were switching to corn syrup to sweeten their beverages. The decision was based on long-term price forecasts, and at the time, newspapers reported that some analysts felt this would not impact sugar prices significantly. By the end of 1981, sugar was trading below 15 cents a pound. In 1985, it had dipped below 5 cents per pound.
* Sugar prices spiked above 15 cents per pound in, partially boosted by news that the US would maintain price supports.
* Suspected crop damage in Cuba and Thailand also boosted prices towards 15 cents per pound in 1994/95.
* Plentiful supplies brought sugar prices below 10 cents a pound by the late 1990s.
* Prices spiked back towards 20 cents a pound in 2005/6 amid price volatility following the EU announcement to cut sugar price guarantees.
* Prices remained volatile, dipping towards 10 cents a pound in 2007/08, spiking up towards 30 cents a pound in 2009/10, back below 15 cents a pound in 2010, and above 35 cents a pound in 2011. Brazilian crop changes, sugar ethanol production, sugar beet crop damage, and various weather events helped fuel the volatility.

Key terms for this market include:

Crush - normally used to describe the amount of sugarcane being processed, often expressed in metric tons

Sugar refining - a process for purifying raw sugar
Key Uses



Food - Sugar was once a luxury food product, but it is now a part of cuisines across the globe. From candies to desserts or for preserving food, sugar can be found in a wide variety of food products. Byproducts of beet sugar processing may also be used in feedstock.

Fuel - Sugar can also be converted into ethanol, making it a critical link to fuel or energy resources. By fermenting sugar from cane crops into ethyl alcohol, sugar went from being mainly a food commodity to a choice for alternative fuels. Brazil is widely noted as a leader in sugar ethanol production and the bio-fuel program that goes with it.

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