What to know about trading Sugar No 11
Ben Lobel April 15, 2021 8:29 AM
Learn all about the Sugar No. 11 market, from its history to what moves its price.
Sugar No. 11 is an agricultural commodities futures contract that acts as a benchmark for worldwide sugar prices. Read on for more on what it is, what moves its price, and how to trade it with City Index.
- What is sugar No. 11?
- Why trade Sugar No. 11?
- History of Sugar No. 11 trading
- History of Sugar No. 11 price
- What affects the Sugar No. 11 price?
- How to trade Sugar No. 11
What is Sugar No. 11?
Sugar No. 11 is the market for the futures price of unrefined sugar, a common ingredient in food and ethanol production. It’s considered a global benchmark for trading the raw material. Produced primarily in tropical regions, the price of Sugar No.11 can be also seen as an economic measuring stick for countries that are major producers, such as Brazil.
One Sugar No. 11 contract is the same as 112,000 lb of raw cane sugar.
Why trade Sugar No. 11?
When trading Sugar No. 11 (and agricultural commodities in general) you should be aware that this market differs from valuable metal commodities like gold and silver in that its price is linked more to supply and demand factors than its inherent value. Traders may choose to be bullish on Sugar No. 11 to bet on a weak USD and hedge against inflation, if they believe supply shortages will push up price, and as a diversification strategy.
On the flipside, those shorting the Sugar No. 11 market may decide to do so based on considerations such as the enduring oversupply of the commodity leading to long-term downward price trends.
Trading Sugar No. 11 with City Index means you can benefit from competitive pricing, reliable trade execution and innovative trading solutions on a trusted platform.
Discover more reasons to trade with City Index.
History of Sugar No. 11 trading
The history of sugar documents one of the oldest commodities, with some citing the domestication of sugar cane as originating as far back as 8,000 BC. From the indigenous people of New Guinea who chewed raw sugar cane, to seaborne traders spreading cultivation practices throughout China, Southeast Asia, and India several millennia later, sugar has a rich and varied history.
But it wasn’t until the 20th century that sugar futures were available to be traded as derivatives in the format familiar to those who speculate on Sugar No. 11 today. Strides towards modern markets were made with the likes of New York’s Sugar and Cocoa Exchange and the Beijing Stock Exchange in China, landmark events in the widespread availability of commodity trading in general.
History of Sugar No. 11 price
Take a look at the history of the Sugar No. 11 price over the past ten years for insight into the key fundamental drivers of this commodity.
What affects the Sugar No. 11 price?
The Sugar No. 11 price is impacted by a range of supply and demand factors that traders should consider before speculating on this market. Knowing the price drivers will allow traders to be better informed, and in a stronger position to predict fundamental moves. These drivers include the strength of USD (and the Brazilian Real), weather patterns affecting supply, and the performance of other commodities, and these are explored here.
Sugar is a highly weather-sensitive crop, with a sensitivity to frost and a requirement for sufficient rainfall. Therefore, poor conditions such as drought in Brazil can impact supply and causing prices to rise, as Brazil is the largest exporter of sugar worldwide.
Sugar has seen a production surplus that has contributed to a downward trend in prices in recent years. However, when production goes down and meets demand rather than exceeds it, prices tend to stabilise a little more.
Supply can also be affected by other factors such as governmental regulation and the profitability of sugar mills.
Sugar No 11. is quoted in USD and, similar to many other commodities, there often is an inverse relationship between dollar strength and the price of sugar. In the case of international trade, this means it costs a smaller amount of other currencies to buy sugar when USD is low, and a larger amount when USD is high.
The Brazilian Real is also an interesting currency to watch, as local output costs will naturally be in the domestic currency of the world’s largest sugar producer. Therefore, it may help to be mindful of the USD/BRL price when trading sugar contracts.
Other commodity movements
Sugar tends to move with other tradeable commodities such as gasoline and crude oil, due to it being the primary ingredient of ethanol. So, Sugar No. 11 traders should also look out for WTI prices as well as keeping an eye on global demand for ethanol.
Global consumption of sugar has shown signs of waning in recent years due to a variety of reasons, public health among them. Any increase in consumption patterns could cause a surge in price, but the longer-term outlook has been negative (see chart above).
How to trade Sugar No. 11
Open your Sugar No.11 trading account by creating an account and be ready to trade Sugar No.11 within minutes. Or if you like, you can first practise trading by opening a demo account and applying your strategy risk-free.
Planning a strategy and identifying an opportunity
It’s now time to plan a strategy and identify a trading opportunity. You may want to use a technical approach, a fundamental approach, or a mixture of both, in order to be fully informed on potential price moves. You’ll also need to prepare stops and limits as part of your risk management strategy.
How to start trading
Opening and closing a position is easy once you have your strategy and opportunity planned out. Simply search ‘Sugar No 11’ in your WebTrader searchbar (see below) for a choice of speculating on this market via spread betting or CFD.
For a futures contract like Sugar No. 11 you will need to decide on the quantity of the commodity to buy or sell in advance of the expiry. For Sugar No. 11 the expiry months are March, May, July and October. At the point of expiry you can decide to continue to hold your position, or settle in cash.
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