Trading sugar futures: what is Sugar No.11?

Over 171 million metric tonnes of sugar are consumed worldwide by consumers, making it one of the most popular commodity markets for traders. Learn how to trade sugar futures and analyse what moves the market price.

What is Sugar No. 11?

Sugar No. 11 is the futures contract for unrefined sugar that trades on the Intercontinental Exchange. It acts as a benchmark for worldwide sugar prices.

There are two types of sugar futures: raw sugar and white sugar. Sugar No.11 is the former – it’s only had a few simple processing steps, rather than the heavy processing applied to white sugar, traded via Sugar No. 16 contracts.

As sugar is a common ingredient in food and ethanol production it’s a highly liquid commodity market. The vast number of traders bidding on the market price can cause lots of volatility. This does increase the level of risk, but it also presents increased opportunities for traders to attempt to profit from both rising and falling prices.

Sugar futures

What affects the Sugar No. 11 price?

The price of Sugar No. 11 is impacted by a range of factors that impact supply and demand for the commodity.

Weather

Sugar is a highly weather-sensitive crop. Therefore, poor conditions such as drought, frost and insufficient rainfall can reduce its supply. If demand for sugar outweighs the supply, it can lead to a run on sugar and push the price up.

Global supply surplus

Sugar has seen a production surplus that caused prices to fall in recent years. It’s estimated that the world will produce 3.5 million tonnes more sugar than it consumes in 2022/23. However, when production slows and meets demand rather than exceeds it, prices tend to stabilise a little more.

Supply can also be affected by other factors such as government regulations and the profitability of sugar mills.

Currency strength

Sugar No 11. is quoted in USD, which means there is normally an inverse relationship between the dollar and the price of sugar. When the US dollar is weak, it costs less to buy sugar in other global currencies, and a larger amount when USD is high.

As Brazil is the world’s largest sugar producer, the Brazilian Real is also an interesting currency to watch – usually as the USD/BRL pair. Local producers will sell their goods in the domestic currency of the world’s largest sugar producer.

Ethanol production

As one of the primary ingredients of ethanol, sugar tends to move in line with gasoline and crude oil. So, Sugar No. 11 traders should also look out for WTI prices as well as keep an eye on global demand for ethanol. 

Public health

Global consumption of sugar has shown signs of waning in recent years due to a variety of reasons, public health among them. Governments in developed countries have been actively trying to change consumer behaviour when it comes to sugar.

For example, in 2018, the UK government introduced a tax on the producers of soft drinks which contained sugar above a certain threshold.

Any increase in consumption patterns could cause a surge in price, but the longer-term outlook has been negative.

How to trade Sugar No. 11

Speculators buy or ‘go long’ on sugar futures when they believe that prices will go up, and they’ll sell or ‘go short’ on sugar futures when they think that prices will fall.

You can speculate on Sugar No.11 with City Index in just four easy steps:

1. Open a City Index account, or log in if you’re already a customer
2. Search for ‘sugar’ in our award-winning platform
3. Choose your position and size, and your stop and limit levels
4. Place the trade

Alternatively, you can practise trading sugar with a demo account and apply your strategy risk-free.

When you’re trading a futures contract via CFDs, like Sugar No.11, you’ll need to decide on the quantity of the commodity to buy or sell in advance of the expiry.