Sugar

The white crystalline substance called sugar is the organic chemical compound sucrose, one of several related compounds all known as sugars. These include glucose, dextrose, fructose, and lactose. All sugars are members of the larger group of compounds called carbohydrates and are characterized by a sweet taste. Sucrose is termed a double sugar because it is composed of one molecule of glucose and one molecule of fructose. While sucrose is common in many plants, it occurs in the highest concentration in sugarcane (Saccharum officinarum) and sugar beets (Beta vulgaris). Sugarcane is about 7 to 18 percent sugar by weight while sugar beets are 8 to 22 percent.

Sugarcane is a member of the grass family and a perennial. It is thought to have originated in New Guinea several thousand years ago, migrating toward Asia and India to the west and into the islands of Polynesia to the east. Sugarcane is cultivated in tropical and subtropical regions around the world roughly between the Tropics of Cancer and Capricorn. It grows best in hot, wet climates where there is heavy rainfall followed by a dry season. On a commercial basis sugarcane is not grown from seeds but from cuttings or pieces of the stalk.

Sugar beets, which are produced in temperate or colder climates, are annuals grown from seeds.

Sugar beets do best with moderate temperatures and evenly distributed rainfall. The beets are planted in the spring and harvested in the fall. The sugar is contained in the root of the beet but the sugars from beets and cane are identical. Sugar beet production takes place mostly in Europe, the US, China, and Japan. Sugar beets are refined to yield white sugar and very little raw sugar is produced.

Sugar beets and sugar cane are produced in over 100 countries around the world. Of all the sugar produced, about 25 percent is processed from sugar beets and the remainder from sugar cane. The trend has been that production of sugar from cane is increasing relative to that produced from beets. The significance of this in that sugarcane is a perennial plant while the sugar beet is an annual, and due to the longer production cycle, sugarcane production and the sugar processed from that cane, may not be quite as responsive to changes in price.

Brazil is currently the largest producer and exporter of sugar in the world. U.S. production is about evenly divided between beet sugar and cane sugar production. The largest sugar beet producing states are Minnesota, Idaho, North Dakota, and Michigan and the largest cane producers are Florida, Louisiana, Texas, and Hawaii.

Sugar futures are traded on the Bolsa de Mercadorias & Futuros (BM&F), Kansai Commodities Exchange (KANEX), the Tokyo Grain Exchange (TGE), the London International Financial Futures and Options Exchange (LIFFE), and the CSCE Division of the New York Board of Trade (NYBOT). Options are traded on the BM&F, the TGE, the LIFFE and the NYBOT.

Raw sugar is traded on the CSCE Division of the New York Board of Trade while white sugar is traded on the London International Financial Futures Exchange (LIFFE). The most actively traded contract is the No. 11 (World) sugar contract at the CSCE. The No. 11 contract calls for the delivery of 112,000 pounds (50 long tons) of raw cane centrifugal sugar from any of 28 foreign countries of origin and the United States. The CSCE also trades the No. 14 sugar contract (Domestic), which calls for the delivery of raw centrifugal cane sugar in the United States. Futures on white sugar are traded on the London International Financial Futures Exchange and call for the delivery of 50 metric tons of white beet sugar, cane crystal sugar, or refined sugar of any origin from the crop current at the time of delivery.

Prices – World sugar prices on the CSCE No.11 sugar nearest-futures chart showed a downtrend during most of 2003 and remained in a generally depressed state not much above the 20-year lows. Specifically, world sugar prices in early 2003 rallied to a 2-1/2 year high of 9 cents/pound, but then entered a bear market that lasted the rest of the year. World sugar closed the year near 5.5 cents/pound, only one-half cent above the 3-1/2 year low near 5 cents posted in mid-2002 and only about 1 cent above the 20-year low of 4.4 cents posted in May 1999. The main bearish factor during 2003 was another very high production year in 2003/4 that was only slightly lower than the record posted in 2002/3. In addition, Brazilian exports hit a record high and Chinese imports dropped due to continued high domestic production.

Supply – World production of centrifugal (raw) sugar in 2003/4 was forecast by the USDA to drop to 144.635 million metric tons, down 1.8% from the record production level of 147.336 seen in 2002/3. Brazil was the world’s largest producer of centrifugal sugar with 16% of world production in 2002/3, followed by India (14%), China (6%), and the US (5%). US centrifugal sugar production in 2003/4 was forecast at 8.070 million metric tons, up 6.2% from 7.6 million in 2002/3. Brazil’s centrifugal sugar production in 2003/4 was forecast at a record 24.780 million metric tons, up 4.1% from 23.81 million in 2002/3. India’s 2003/4 production was forecast at 19.88 million metric tons, down 10.0% from 22.10 million in 2002/3. Chinese production in 2003/4 was forecast to remain very high at 10.07 million, although down 5.3% from 10.637 million in 2002/3. World ending stocks of centrifugal sugar were forecast to drop to 34.499 million metric tons, down 6.9% from 37.045 million in 2002/3.

Demand – World consumption of centrifugal (raw) sugar was forecast by the USDA to rise slightly by 1.1% to 139.311 million metric tons in 2003/4 from 137.725 million in 2002/3. US consumption was forecast to drop to 8.778 million metric tons, down 4% from 9.135 million in 2002/3.

Trade – World exports of centrifugal sugar were forecast to fall slightly to 45.107 million metric tons from 45.724 million in 2002/3, although that is still a high level of exports on an historical basis. Brazil is the world’s largest exporter of sugar with about 30% of world exports. Brazilian exports in 2003/4 were forecast to rise to a new record 14.250 million metric tons, up 1.8% from 14.000 million in 2002/3. The import of sugar into the US is restricted by tariff-rate quotas and US sugar imports in 2003/4 were forecast at 1.437 million metric tons, down 7.5% from 1.554 million in 2002/3.