After noticing that we monitor raw and refined sugar contracts, one of our clients asked which specific contract to trade. As a result, we have put together a brief explanation of the differences between the two contracts.
Sugar Contracts: Which One to Trade?
Two of the most significant sugar futures are Raw Sugar #11 and Refined Sugar #5. These futures contracts have unique qualities, production processes, and eventual end uses that differentiate them. Let’s take a closer look at each of these futures contracts.
Sugar #11
Raw Sugar #11 is the most actively traded sugar contract, and it is traded on the Intercontinental Exchange (ICE) with the symbol @SB. Raw Sugar comes from the first pressing of sugarcane and is primarily found in Brazil, one of the largest sugar-producing countries in the world. The value of raw Sugar is determined by two main qualities: polarization and color. Polarization indicates the sucrose content of the Sugar, while color identifies the residual molasses.
Raw Sugar #11 is commonly used in industrial applications, especially in the production of confectionery, baked goods, and other processed foods. It is particularly popular in regions where there is a high demand for raw Sugar or where refining the raw Sugar to white Sugar is not preferred or required.
Sugar #5
On the other hand, refined Sugar #5 trades on the London International Financial Futures Exchange (LIFFE) under the symbol @LSU. Refined Sugar is predominantly produced in Asia and Europe, resulting from a rigorous refinement process where impurities are filtered out. This process creates a uniform texture and sweetness, a white color, and low impurity levels.
Refined sugar #5 is considered a premium quality sugar highly valued in the food industry. It is used in a wide range of applications, including baked goods, candy, and other processed foods, where it adds sweetness and enhances the flavor. Its high sucrose, low moisture, and pure color make it highly desirable for these applications.
If you trade Sugar, you will want to focus on Sugar #11 (Symbol @SB) first and foremost. It’s the most liquid of the two contracts, meaning it has a high volume of trading activity, making it easier to enter and exit positions in the market.
