Sugar No. 11: The World Raw Sugar Benchmark

Key Takeaways

• Sugar No. 11 world raw is the global benchmark for export raw cane sugar.
• One contract is 112,000 pounds, or 50 long tons, priced in cents per pound.
• A one hundredth of a cent tick equals 11.20 dollars per contract.
• Traders confuse it with the US domestic Sugar No. 16, which prices a protected market.

What Sugar No. 11 World Raw Is

Sugar No. 11 world raw is listed on ICE Futures U.S. under the symbol SB. The contract calls for delivery of 112,000 pounds, equal to 50 long tons, of raw centrifugal cane sugar. Delivery is free on board the receiver's vessel at a port within the country of origin, with sugar accepted from many producing nations.

It is the world reference price for raw sugar. Mills in Brazil, Thailand, India, and other exporters, along with refiners and traders worldwide, use it to price and hedge sugar that moves across borders. Because it reflects the free global market, it is the most watched sugar contract.

The Intuition

Raw sugar is a globally traded commodity. A mill in Brazil and a refiner in the Middle East need a common price to transact, even though they sit on different continents. Sugar No. 11 provides that single world reference, set by open trading rather than by any one government.

The free on board delivery term is central. The price reflects sugar delivered onto a ship at the origin port, before freight and import duties. This makes it a clean read on the underlying supply and demand for export sugar, separate from the trade barriers that distort domestic markets in places like the United States.

Sugar also competes with a substitute for the same fields. In Brazil, the same sugarcane can be turned into either raw sugar or ethanol fuel. Mills choose the mix based on which product pays more, so the sugar price is partly tied to gasoline and ethanol prices. When fuel is profitable, mills make more ethanol and less sugar, which tightens the export market and supports the No. 11 price.

How It Works

The contract specifications set by ICE are:

Contract size:       112,000 pounds (50 long tons)
Price quotation:     US cents per pound
Minimum tick:        1/100 cent per pound = 11.20 dollars per contract
Contract months:     March, May, July, October
Delivery basis:      Free on board, port in country of origin

Because one contract is 112,000 pounds, a one cent per pound move changes the contract value by 1,120 dollars. The minimum tick of one hundredth of a cent is therefore 11.20 dollars.

Prices respond to harvests in the major exporters, especially Brazil, India, and Thailand. Weather, the share of cane diverted to ethanol in Brazil, and government export policy in India can swing global supply. The Brazilian real also matters, since a weaker real encourages Brazilian mills to export more. Both ICE supply data and the USDA WASDE sugar tables inform the demand and supply picture.

Worked Example

Suppose a refiner expects to buy 1,120,000 pounds of raw sugar in several months and fears prices will rise. The October Sugar No. 11 contract trades at 20.00 cents per pound.

To hedge, the refiner buys 10 contracts, since 10 times 112,000 pounds equals 1,120,000 pounds.

If the world price rises to 23.00 cents by purchase time, the physical sugar costs 3 cents more per pound, or 33,600 dollars across the volume. The long futures gained 3 cents per pound, which is 3,360 dollars per contract times 10, also 33,600 dollars. The futures gain offsets the higher cost, holding the effective price near 20 cents.

Common Mistakes

1. Confusing No. 11 with No. 16. Sugar No. 11 is the world export market. Sugar No. 16 is the US domestic market behind import quotas, and the two prices can diverge sharply.

2. Ignoring Brazil's ethanol switch. Brazilian mills can shift cane between sugar and ethanol. When fuel is more profitable, less sugar reaches the export market, lifting prices.

3. Overlooking export policy. India can restrict or allow sugar exports by decree. A policy change can flood or starve the world market overnight.

4. Forgetting the currency link. A weaker Brazilian real makes Brazilian sugar cheaper in dollar terms and encourages exports, which can pressure the world price.

5. Misjudging tick value. A tick is one hundredth of a cent, worth 11.20 dollars, but a full one cent move is 1,120 dollars per contract. Sizing on the wrong figure distorts risk.

Frequently Asked Questions

What is sugar No. 11 world raw in simple terms? Sugar No. 11 world raw is the global benchmark futures contract for export raw cane sugar. Each contract covers 112,000 pounds delivered onto a ship at the producing country's port.

How does sugar No. 11 world raw affect investment decisions? Mills, refiners, and traders use it to hedge sugar that crosses borders. Investors read it as the cleanest gauge of world sugar supply and demand, sized at 1,120 dollars per one cent move.

What is a real-world example of sugar No. 11 world raw? A refiner needing 1,120,000 pounds can buy 10 contracts at 20 cents. If the world price rises to 23 cents, the futures gain offsets the higher physical cost.

How can investors use sugar No. 11 world raw effectively? Watch Brazilian, Indian, and Thai harvests, Brazil's sugar versus ethanol mix, and Indian export policy. Track the Brazilian real, since it shifts export incentives.

How is sugar No. 11 different from sugar No. 16? No. 11 prices the free world export market, free on board at origin. No. 16 prices the protected US domestic market, delivered to US refinery ports, so the two often differ.

Sources

1. ICE. "Sugar No. 11 Futures." https://www.ice.com/products/23/Sugar-No-11-Futures
2. ICE Futures U.S. rulebook. "Sugar No. 11." https://www.ice.com/publicdocs/rulebooks/futures_us/11_Sugar_11.pdf
3. CME Group. "No. 11 Sugar Futures Contract Specs." https://www.cmegroup.com/markets/agriculture/lumber-and-softs/sugar-no11.contractSpecs.html
4. USDA. "World Agricultural Supply and Demand Estimates (WASDE)." https://www.usda.gov/about-usda/general-information/staff-offices/office-chief-economist/commodity-markets/wasde-report

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.