Global Sugar Industry Report 2010

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The Global Sugar Industry 2009/2010 "The End of Cheap Food"

Our Summary Report's Notes:

Abbreviations and Explanatory Notes Introduction: • • • •

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Sugar Definition Sugar Cane Definition Sugar Beet Definition Ethanol from Sugar Definition

Factors impacting sugar to ethanol viability The EU converts refined sugar to ethanol Market

• • •

Production and consumption Production capacity Use of raw material Brazilian Sugar

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Producing Brazilian Sugar Types of Brazilian Sugar for Export Brazilian Ethanol Production Brazilian Sugar and Ethanol Industry Indus U.S. and Brazilian Ethanol Comparison International Sugar Organization (ISO) The Global Alliance for Sugar Trade Reform and Liberalization World Food Price Inflation in 2007/2008 (FAO Report Review) Sugar(World Production - Supply and Distribution)

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PRODUCTION World production and consumption of sugar Industry structure and development Sugar Futures and Options Trading

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The Role of the Exchange Trading Sugar Options ISO World Sugar Market Review

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Abbreviations and Explanatory Notes

ACP African, Caribbean and Pacific States

Affination

Production of a magma by mixing sugar with syrup and then centrifuging the magma with or without washing

Affined sugar

Sugar purified by affination

After product sugar

Sugar gar of the final crystallization stage (C sugar) Alkalinity In the product streams of a beet sugar factory, the result of a titration with standardized acid solution to a phenolphthalein endpoint or equivalent pH, expressed as g CaO per 100 ml Alkalinity, effective

The he solid residue left after incineration in the presence of oxygen (crude ash, carbonate ash). In analysis of sugar products, sulfuric acid is added to the sample, and this residue as sulfated ash heated to 800 °C is taken to be a measure of of the inorganic constituents. Sometimes determined indirectly by measure of the electrical conductivity of solutions of the products. Alliance for Sugar Trade Reform and Liberalization The Global Alliance for Sugar Trade Reform and Liberalizations was established es during in November 1999 when members (Australia, Brazil, Canada, Canada Chile, Colombia, India, Guatemala, South Africa and Thailand) agreed and signed a communiqué calling for WTO agreement on agriculture that includes positive, progressive and meaningful meaningful reform of the world sugar market by ensuring that sugar is included as an important element of the agricultural trade agenda. Availability of processing plant capacity, and the weather Both influence the duration of harvesting and processing - the industry dustry can lay up harvested beet until processed, but a frost-damaged frost damaged beet becomes effectively unprocessable.

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Bagasse The residue obtained after crushing cane in a mill is known as bagasse. Depending on the number of the mill it is referred to as first first mill bagasse, second mill bagasse, etc. After a diffuser the residue is called diffuser bagasse. The final residue from a milling train or from the dewatering mills of a diffusion plant is called final bagasse or simply, bagasse. Bagasse Extract The liquid fraction decanted from the bagasse after blending with water in the colddigester. Bear Market: A market in which prices are declining. declining

Beet Sugar beet root, botanically the thick main root with hypocotyls in which sugar is stored. Beet brei Beet sample prepared for analysis in the form of fine particles. particles Beet clamp Stack of stored beet. Beet flume Concrete-lined lined ditch or metal trough designed for the hydraulic transport of beet. beet Beet knife Rectangular piece of steel designed to slice beet into cossettes.

Beet pile Store of beet in suitably prepared areas of the factory yard. yard Beet pump Special centrifugal pump used to lift beet and water. water Beet rasp, beet saw Devices to obtain beet brei from beet samples. samples Beet sampler Scooping device evice to collect beet samples. samples

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Bid A contractually binding offer to buy sugar at a certain price within a certain time limit that can be given either in writing or orally. orally (Sometimes Sometimes referred to as a “firm bid”. Blended sugar (sugar dextrose) In some ome locales, dextrose, a corn-derived corn derived sweetener, is added to granulated cane or beet sugar to create a white granulated blend that may be less expensive than traditional sugar. ( Dextrose is about 70% as sweet as sugar and is more hygroscopic (water attracting). ing). Because of these characteristics, blends may not perform exactly as sugar in certain recipes. Brown sugar Brown sugar consists of sugar crystals contained in molasses syrup with natural flavor and color components. Many sugar refiners produce brown brow sugar by preparing and boiling special syrup containing these components until brown sugar crystals form. Brix Refractometer brix the term used when a refractometer equipped with a scale, scale based on the relationship between refractive indices at 20°C and d the percentage by mass of total soluble solids of a pure aqueous sucrose solution, is used instead of a hydrometer to test the solids concentration of a sucrose containing solution. Brix-Free Water The water associated with the fibre in cane and bagasse. bagasse. In some respects this sorpfionwater behaves in a manner similar to water of hydration and it is not available for dissolving sucrose. It is driven off at elevated temperatures. The amount of brix-free free water is assumed to be 25% on dry fibre. Candy crystals Large sugar crystals produced by a special crystallization process (19 19. Mai). Carryover The surplus stocks of a commodity from a previous season that are used in the current season. Current Crop (CC) Sugar to have been produced since the start start of the current crop year for that particular origin. COMMISSION OMMISSION REGULATION (EC) No 77/2008 Commission regulation (EC EC) No 77/2008 of 28 January 2008 setting delivery obligations for cane sugar to be imported under the ACP Protocol and the Agreement with h India for the 2007/2008 delivery period.

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COMMISSION REGULATION (EC) No 505/2009 Commission regulation (EC EC) No 505/2009 of 15 June 2009 adjusting the delivery obligations for cane sugar to be imported under the ACP Protocol and the Agreement with India ndia for the 2008/2009 delivery period and the delivery period beginning on 1 July 2009. 2009

Convert Metric Tons / Tons

To convert this short tons short tons kilograms Pounds Pounds metric tons metric tons

To this metric tons pounds pounds kilograms grams troy pounds pounds short tons

Multiply by: .9072 2,000 2.2046 0.4536 1.2153 2,204.6 1.1023

Convert Acres / Hectares 1 Hectare = 2.47 Acres. Acres 1 Acre = 0.40 Hectares. Hectares

To convert this pounds per acre short tons per acre kilograms per hectare kilograms per hectare tons per hectare tons per hectare

To this kilograms per hectare kilograms per hectare metric tons per hectare pounds per acre short tons per acre kilograms per hectare

Multiply by: 1.14 2.25 .001 .88 .44 1,000

Crystal content Proportion by mass of crystals in the magma. magma Crystallization in concentrated / supersaturated sugar syrups Crystallization or granulation is natural conversion from liquid state into solid state due to cooling of supersaturated liquid. This is NOT deterioration. terioration. CSR Sugar As Australia’s largest sugar producer, CSR has seven mills located in some of Australia’s most productive sugarcane regions. CSR also owns 75% of joint venture interests in sugar refining in Australia and New Zealand and is a major maj Australian ethanol producer.

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DAC Extract The liquid fraction decanted from the cane after blending with water in the colddigester. DAC Factors Brix Factor The percentage ratio of the total brix in mixed juice, final bagasseand where applicable, ble, diffuser press water mud, to total brix in cane as determined by direct analysis. Pol Factor The percentage ratio of the total pol in mixed juice, final bagasseand where applicable, diffuser press water mud, to total pol in cane as determined by direct d analysis. Fibre Fiber is the cane plant’s vegetable skeleton in which juice is stored and through which plant food, dissolved in water, is distributed throughout the plant. In the milling process, the fiber cells are ruptured, thus freeing the juice. juice. The fiber content of sugar cane varies according to variety. variety The normal range is 10% to 16%. Medium and consistent fiber content is desirable in commercial varieties. varieties DAC fibre Fibre % cane derived from direct cane analysis and applying the formula Fibre % cane = (100-M-3 3b)/(1-0.0125b) in which M= moisture % cane b= brix % extract Demurrage An agreed amount payable to the owner in respect of delay to the vessel beyond the laytime, for which the owner is not responsible. Despatch An agreed amount payable by the owner if the vessel completes loading or discharging before the laytime has expired. expired Despatch On All Time Saved (ATS ) Despatch money shall be payable by the owner from the completion of loading or discharging to the expiry of the laytime including periods exempted from the laytime. Discounts Negative price differential between physical sugar and its corresponding futures month.

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Discretionary Account An account in which the customer gives the broker or another party trading tra authority to buy and sell commodities on his behalf.

Dried sugar beet cossettes Commercial term for dried (including pressed) cossettes from which no sugar has been extracted. EBA Everything But Arms (initiative). Initiative designed in favour of o Least Developed Countries. Ethanol An alcohol (C2H5OH), used for a variety of purposes. purposes

Equity The total cash value of an account, including the amount of profit or loss that would be incurred if the existing futures positions were liquidated at th the current settlement price. Exercise Taking advantage of the right to buy or sell the underlying futures contract at the agreed upon strike price. Ex-pit Transaction A legal trade executed outside the exchange trading ring. Used normally to transfer positions from one clearer to another. EU "quota" and subsidized The EU subsidies and a high import tariff make it difficult for other countries to export sugar to the EU states, or to compete with the Europeans on world markets. Extraction losses Quantity ntity of sugar entered but not contained in the raw juice as a percentage of the beet or cane mass.

False grain Undesirable small crystals. crystals Fanged beet Beet with multiple tap roots. roots

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Final molasses The black syrup, commonly known as molasses or ‘C’ syrup, remaining after the sugar syrup has been boiled and passed through the centrifugal for the last item in a mill or refinery. The sugar it contains cannot be removed economically. A typical analysis of final molasses includes sucrose (34.1%), reducing reduci sugars (16.5%), ash (11.3%), water (21.8%) and various sugar, gums and acids (16.3%). The ash includes calcium, magnesium, potassium, silicon, iron, and phosphorous and other elements in the form of inorganic salts.

Force Majeure Events and happenings ngs that occur which prevent or delay loading or shipping. shipping These events, as stated in the rules of SAL and RSA, are as follows: War, strikes, rebellion, insurrection, political or labour disturbances, civil commotion, fire, stress of weather, act of God orr any cause of force majeure (Whether or not of like kind to those before mentioned) beyond the sellers control. Form A Otherwise known as GSTP Form A showing that the sugar is from a country of origin which is a member of the General System of Trade Trade Preferences. Preferences Fructose A sugar, which occurs in, fruit, the nectar of flowers, honey, and in cane juice and sugar products. It is formed in equal quantity with glucose when sucrose is inverted. In solution, it rotates polarized light to the left. It has has the chemical composition C6H12O6. Fuel ethanol Ethanol blended with petrol, used as a fuel for the transportation sector. Ethanol is now the most widely used alternative fuel in the world; the biggest use of ethanol in the United States is as an additive additive in gasoline. It serves as an oxygenate (to prevent air pollution from carbon monoxide and ozone), as an octane booster (to prevent early ignition, or 'engine knock'), and as an extender of gasoline. GSTP General System of Trade Preferences. A certificate ce (sometimes referred to as a Form A) showing that the country of origin of the sugar is a member of the GSTP group of countries. This is one of the documents that are necessary in order to enter sugar into other GSTP countries at often preferential preferential rates of import duty. Glucose A sugar, which occurs naturally in grapes, honey, sweet fruits, and in cane juice and sugar products. It can also be made from wheat. In the human body, sucrose is converted into glucose and fructose before being used to provide energy. It has the chemical composition C6H12O6 C and may also be called dextrose. dextrose

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Hardening of brown sugar Brown Sugars have a natural tendency to harden upon storage due to inherent moisture. The ideal storage conditions for these sugars are a constant temperature between 10-22 degrees and with a humidity variation within 40-60%. However, if storage conditions are not right, then the product will turn hard. To soften the hard natural brown sugar is to expose it to moisture (surprising) by putting tting it in a container and covering it with damp cloth or by putting some apple wedges in the container and close the lid. Helms Burton Act American legislation that prevents US companies and their overseas subsidiaries from trading Cuban sugar. HFCS High Fructose Corn Syrup. This is the most common name for starch-based starch based fructose/glucose syrups. Corn is the starch base of these syrups. Other suitable but not as widely used starch sources include rice, wheat and tapioca. In Europe HFCS is referred to as iso-glucose. ICUMSA International Commission for Uniform Methods of Sugar Analysis. A scale of measurement for the colour of sugar. The lower the ICUMSA, the whiter the sugar. Insoluble Solids Insoluble material in mixed juice or press water mud, determined gravimetrically by filtration according to a prescribed method. Initial Margin The amount of money that must be deposited in an account when a futures position is established. Also called Original Margin International Scale(of polarization premiums). pr For every full degree above 96 to and including 97 add 1.5%, for every degree above 97to to and including 98 add 1.25%, and for every degree above 98 to and including 99 add 1.0%. Fractions of degree are calculated pro rata. Intermixed Cane That portion of cane on a cane carrier originating from the overlapping of different consignments. Its composition is unlikely to be representative of anyone consignment and it is therefore excluded from consignment sampling.

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International Sugar Agreement Agreemen The International Sugar Agreement of 1958: A United Nations Sugar Conference met in Geneva during September and October, and prepared the text of a new International Sugar Agreement. ISO International Sugar Organization Inverse Positive price differential erential where the price of the nearby shipment position is at a premium to the more deferred position. Juice Mixed juice the mixture of juices from the extraction plant delivered into the juice scales. Press water the juice expressed in dewatering diffuser diffuser bagasse. Juice purification Partial removal of no sugar substances from the raw juice while producing a thin juice. Laytime The period of time agreed between the parties during which the vessel owner will make and keep the vessel available for loading loading or discharging without payment additional to the freight. Limit Orders Orders to brokers to buy or sell at a specified price or better. Sometimes called resting orders. Liner Out The seller / ship owner delivers the commodity to the port of discharge and discharges on to the quay at no cost to the buyer. No demurrage or dispatch to be paid. LDA Late Delivery Allowance. LDCs Least Developed Countries. Countries Magma Mixture of crystals and syrup. syrup

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Minimum Price Fluctuation Also called minimum m tick. The minimum price increment in a futures market. In New York No.11 Sugar it is 1 point, which equals $11.20 per contract of 50 tons. Mill Whites Low quality white sugar produced directly at the mill with a color usually around 300 ICUMSA. (Otherwise rwise known as plantation whites.) Notice of Readiness (NOR) The notice to charterer, shipper, receiver, or other person as required by the charter party that the vessel has arrived at the port or berth and is ready to load or discharge. Mixer Apparatus atus to distribute magma to the centrifugals. centrifugals Moistness in sugar sachets during storage All natural brown sugars have a natural tendency to absorb moisture or use existing moisture to become moist and hard. The basic character of being hygroscopic, 100% natural, containing molasses, minerals is the main reason why this natural brown sugar retains & imparts rich flavor to foodstuff. Moisture absorption is a factor of external parameters like ambient humidity, storage conditions, packing conditions and amount amount of natural mineral and nutrient contents in natural brown sugars. Molassed dried pulp Commercial term for a mixture of dried pressed pulp and molasses. molasses. Molasses bearing product of the sugar end whose purity has been reduced to the The sugar-bearing point that further crystallization of sugar is not economical feasible without special treatment of molasses. molasses Mud The material removed from the bottom part of the subsides.. The mud contains the settled insoluble solids. Net titer (nt) A measure of the commercial ercial value of raw sugar for refining purposes. Net titer provides a method for expressing different sugar at a standard value and is used of statistical and payment purposes. The net titer of a sugar is calculated by subtracting the reducing sugar content cont and five times the ash content from the polarization of the sugar.

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Non-centrifugal centrifugal sugars In some areas of the world sugar cane juice is merely evaporated to produce a crude raw sugar; the sugar crystals are not removed from the mother syrup in centrifugals. The sugar is generally consumed where it is produced. Some of these sugars are known as Jaggery, Gur, Piloncilo and Muscovado. Jaggery and Gur are made in India by evaporating cane juice in an open pan. The juice is evaporated to almost dryness dryness and is then cast in open moulds or loaves. A large amount of sugar consumed in India is in this form. Nonsucrose Substances contained in raw material and its products except sucrose and water. water Nonsucrose content Difference between dry substance content co and its sucrose content. Nonsugar Common overall term for substances contained in the raw materials and products of the sugar industry except sucrose (sugar) and water. water Nonsugar content Difference between dry substance content and sugar content in in the meaning of Sugar content (a) and (b) (q.v.). (q.v.) Normal Mass The mass of sample equal to the normal mass of sucrose. That mass of pure dry sucrose which, when dissolved in water to a total volume of 100cm3 at 20°C C and read at the same temperature in a tube 200 mm long, gives a reading of 100 degrees on a saccharimeter scale. scale According to the International Sugar Scale the normal mass of sucrose is 26,000 g. Nucleation Generation and development of small crystals capable of growth. Pelleted seed Beet et seed brought to uniform size by coating. coating Per Hatch Per Day Means that the lay time is to be calculated by dividing the quantity of cargo by the result of multiplying the agreed daily per hatch by the number of the vessel’s hatches. Each pair of parallel parallel twin hatches shall count as one hatch. Nevertheless, a hatch that can be worked simultaneously by two gangs shall be counted as two hatches. Piled beet Stored beet (as distinct from freshly harvested beet). beet)

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Plantation Whites Low quality or unrefined refined white sugar produced directly at the mill. Points One point is 1/100 of one cent per pound. pound To convert the price of sugar from points per pound into dollars per metric tone multiply them by 0.220462. 0.220462 To convert them into dollars per long ton multiply by 0.224. Polarization Measurement of sucrose content in sugar. sugar 100 are maximum and means 100% sucrose. Raw sugar is usually traded basis 96 polarizations. Polarization Premiums Scale of payments for rewarding the producer for delivering sugar sugar above 96 polarizations or penalizing the producer for delivering sugar between 96 and 93. Pol The apparent sucrose content of any substance expressed as a percentage by mass and determined by the single or direct polarization method. The term is used d as if it were a real substance. Polarization Term customarily used in sugar analysis for the optical rotation of a sugar industry product, measured under the same conditions. conditions Precision seed Monogerm seed produced from multi-germ multi seed by rubbing and grading. grading Preparation index Percentage ratio of dry substance in ruptured cells to total dry substance in cane. cane Pressed pulp Pressed, exhausted cossettes, leaving the pulp presses. presses Processed seed Beet seed brought to a uniform size by mechanical treatment treatment and screening. screening Purity The percentage ratio of sucrose (or pol) to the total soluble solids (or brix) in a sugar product.. The following terms are in general use: Refractive apparent purity: The percentage ratio of pol to refractometer brix. G.C. sucrose crose refractometer brix purity: The percentage ratio of GC sucrose torefractometer brix.

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Purity Sugar content as percent of dry. dry Raw juice Juice obtained from beet or cane after extraction, pressing or milling. milling Raw juice draft n from the extraction plant as percent of mass of cossettes Mass of juice drawn introduced. Ratoon Cane, which grows from the stools, left in the ground after crop has been harvested. Raw Sugar Raw sugar is a tan to brown, coarse granulated solid obtained on evaporation of o clarified sugar cane juice. Raw sugar is processed from the cane at a sugar mill and then shipped to a refinery. refinery It is about 98% sucrose. Raw sugar is not sold to consumers. Reducing sugars Reducing sugars are those, which have the ability to chemically chemically reduce (withdraw oxygen) certain other chemical compounds. In milling and refining, reducing sugars (mainly glucose and fructose) are regarded as impurities. Refined sugar After being harvested, the sugar cane is sent to the refinery (sugar is always transported in a raw or partially refined condition as humidity will damage a fully refined bulk shipment) where it is first washed to remove soil and impurities. Sugar which has passed through the refining process (involving removal of impurities) making g it more suitable for direct human consumption or use in the manufacture of other foods. Also known as white sugar. Recoverable sugar Part of the sugar in beet, which can be obtained as white sugar in % on beet. beet Refining Purification of sugar through recrystallizing and chemical and physical methods. methods Remelting Refers to taking domestically produced raw sugar and refining it into whites either for local consumption or for export. (Usually refers to Thailand.)

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Remelting Refers to taking domestically domestically produced raw sugar and refining it into whites either for local consumption or for export. (Usually refers to Thailand.) RSA Refined Sugar Association. Run-off (syrup) General term for syrups produced on centrifuging magma. SAL Sugar Association of London. SEOs Seller’s Executable Orders where the seller gives instructions to the buyer to sell futures to set the final contract price plus or minus the premium or discount. Silin number Length in meters of 100 grams of cossettes. cossettes

Spreads Price ce differentials between different forward shipment positions for either physicals or futures.

Stop Orders Orders to buy or sell at the market if the contract trades at or through a specified price (the stop price). Stop Limit Orders Orders to buy or sell at a specified price or better if the contract at or through a specified stop price. Store brown sugar Store brown sugar in a way that allows the product to retain its natural moisturemoisture in its original plastic bag (closed tightly) or in a moisture-proof moistu proof container. If the sugar hardens, let it stand overnight in a sealed jar with a damp paper towel or apple slice. For a quick fix, fix heat the needed amount in a 250 oven for a few minutes, or microwave on low for 1-2 minutes per cup. Use immediately Strike A concerted industrial action by workmen causing a complete stoppage of there work which directly interferes with the working of the vessel. Refusal to work overtime, go-slow, slow, or working to rule and comparable actions not causing a complete stoppage shall not be considered a strike.

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Strike Price The fixed price in a range of fixed prices in the option market at which the calls or puts are traded, for a premium to the seller / granter. Sucrose D-glucopyranosyl-β-D-fructofuranoside, fructofuranoside, known The pure disaccharide α-D commonly as sugar. In the South African Sugar Industry sucrose is determined by GC. Sugar Cane Botanically a tall grass of the genus Saccharum and agriculturally the crop produced from hybrids ids which are the progeny of a number of Saccharum species commonly referred to as cane. Specifically for the determination and distribution of sucrose in cane it is the raw material accepted at the mill for processing. Sugar No. 11 contract

ld benchmark contract for raw sugar trading. Is the world The contract prices the physical delivery of raw cane sugar, free-on-board board the receiver's vessel to a port within the country of origin of the sugar. Supersaturation coefficient Quotient formed by dividing the the sugar/water ratio of a supersaturated solution by the sugar/water ratio of a saturated solution under the same conditions. conditions (temperature and purity or no sugar/water ratio)

Supersaturation, critical Supersaturation at which nucleation begins spontaneously. spontaneou Surplus Sugar Formerly known as C sugar, surplus sugar is that which is produced in excess quota. Starting in 2006, there has been an agreement in place that British Sugar buy these feom beet growers at a reduced price, similar to how C beet was handled. Syrup General term for sugar solutions of higher concentration. concentration

Swedish number Ratio of the mass of cossettes longer than 5 cm to those shorter than 1 cm.

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Switch Liquidating a futures position in one delivery month while simultaneously establishing that position in another delivery month. Transport water Water used to transport beet. beet Tel Quel Literally Quality as is A method of buying or selling sugar when the seller includes the cost of the polarization premiums in the price. Therefore, Therefore, no polarization premiums are to be paid. Time Value The amount of the option premium that exceeds its intrinsic value. Tolling The refining of imported raw sugar for re-exports as whites. Trade house A company or corporation that buys sells and transports physical commodity for his or her own account and risk. TCSC Thai Cane Sugar Corporation. TSTC Thai Sugar Trading Corporation. Turbinado sugar Turbinado sugar is raw sugar that has been refined to a light tan color by washing in a centrifuge entrifuge under sanitary conditions. Surface molasses is removed in the washing process. In total sugar content turbinado is closer to refined sugar than to raw sugar. It can be purchased in many health food stores and some supermarkets. UK Scale Scale off polarization premiums. premiums Buyer has to pay an extra 1.4% per degree for sugar with a polarization from 96 to 99 degree. Part of a degree to be charged pro rata. No extra premium to be paid above 99 degree.

U.S producers of sugar have switched to corn syrup syru The United States sets high sugar prices to support its producers, with the effect that many former consumers of sugar have switched to corn syrup (beverage manufacturers) or moved out of the country (candy makers).

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Variation in crystal size & color of brown sugars The natural brown sugars at sugarindia are not produced by coloring refined sugars. A non natural brown sugar is simply a white sugar crystal, which is then sprayed with some form coloring to give it a 'brown' appearance, in which case manufacturer has a option to control both grain size and color of finished product. Natural Brown sugars such as demerara, coffee sugar, muscovado etc are produced directly from sugar cane. c Variation Margin The amount of money that must be deposited in a futures account to restore the equity back to the initial margin requirement. Ventilation of stored beet Introduction of air current in order to maintain desired storage temperature. temperature VHPs Very High Polarization Sugar. A non-exact non exact term that usually refers to bulk Brazilian sugar that has a polarization between 99.0 and 99.5 degree. degree In Thailand VHPs can refer to bulk raw with a polarization above 99.5 degree. VVHPs Very Very High Polarization larization sugar. A non-exact non exact term that usually refers to bulk Brazilian sugar with a polarization above 99.5 degree. (They They can also be called Bks, which refers to VVHPs with a maximum ICUMSA of 750). WABCG World Association of Beet and Cane Growers. Growers Washing Washing of the crystals during centrifuging with syrup, water or steam Washing off Unloading of beet by water jet Wash run-off (syrup) Syrup produced in washing sugar during centrifuging. centrifuging

Wheat and Corn (maize) threaten the traditional sugar market market The Cheap prices of glucose syrups produced from wheat and corn threaten the traditional sugar market. Used in combination with artificial sweeteners they can allow drink manufacturers to produce very low-cost low goods.

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Weather Working Day (WWD) A working day of 24 consecutive hours except for any time when prevents the loading or unloading of the vessel or would have prevented it had work been progress. Weight variation in sachets Weight variation in sugar sachets is an inevitable phenomenon. phenomen Though customers have nothing to lose. Sugarindia packs sachets/ tubes of sugar by weight & not by counting. Net weight of each carton is 10kg counting ideally 2000 sachets/ tubes of 5 gms each or as the case may be. Whites Premiums Usually refers s to the price differential between raw and white sugar as shown by the New York and London futures markets. (Expressed in dollars).

WIBON Whether in Berth Or Not. If no loading or discharging berth is available on her arrival, the vessel, on reaching reaching any usual waiting place at or off the port, shall be entitled to tender notice of readiness from it and lay time shall continue in accordance with the charter party. WIFPON Whether In Free Pratique Or Not. The completion of customs formalities shall shal not be a condition precedent to tendering notice of readiness, but any time lost by reason of delay in the vessel’s completion of these formalities shall not count as lay time or time on demurrage.

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TYPES OF SUGARS

SUGAR

DESCRIPTION

Baker's Sugar

Extra--fine, fine-grained grained sugar with uniform grain size, gives perfect shine & texture on baking. As its name suggests, it has been developed specially for the baking industry.

Barbados

Rich brown sugar having a nutty, caramel flavor, natural moistness, and subtle molasses aroma. Nutritious substitute for table sugar

Barley sugar

Granulated sugar melted to 185 deg C. No unique flavor or color characteristics If heated to 200 deg C, it caramelizes. characteristics. caramelizes

Brown sugar

Light to dark brown sugar - with color & properties erties depending on inherent molasses content. Its natural moistness and deep, rich aroma makes it ideal for full-flavored full recipes.

Cane juice

Produced by slow crystallization of a concentrated sugar solution, this sugar is commonly used in Belgium beers. beers. It comes in several colors light to dark. When added to beer, it thins out the high gravity beers and contributes color and, for the dark version, some residual caramel flavors.

Candy sugar

Produced by slow crystallization of a concentrated sugar solution, this sugar is commonly used in Belgium beers. It comes in several colors light to dark. When added to beer, it thins out the high gravity beers and contributes color and, for the dark version, some residual caramel flavors.

Castor sugar (or caster sugar)

Sugar ar with extremely fine grain size making it ideal for extra fine textured cakes and meringues, as well as for sweetening fruits and iced-drinks drinks since it dissolves easily. easil

Chinese sugar

Finely crystallized refined sugar.

Cinnamon sugar

Lightly colored granulated sugar with added flavoring.

Coarse sugar

Large crystals of granulated sugar.

Coffee sugar

Large grained, sparkling, brown-colored brown colored sugar crystals specially developed to bring out the true flavor of coffee beans Equimolar mixture of glucose & fructose in liquid form. It absorbs moisture very fast, fast is about 25% sweeter than normal sugar, sugar is highly soluble in water and alcohol, and caramelizes fast

Invert sugar

Demerara sugar

Golden brown sugar crystals rolling with the rich aroma of tropical sugarcane molasses. Its distinctive flavor and crunchy texture makes it ideal for hot and cold beverages, sprinkling on cereals, or as a topping on cakes and cookies

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Introduction Sugar Sugar, ugar, or sucrose, is a carbohydrate that occurs naturally in every fruit and vegetable in the plant kingdom. It is a major product of Photosynthesis, the process by which plants transform the sun’s energy into food. Sugar occurs in greatest quantities in sugarcane and sugar beets from which it is separated for commercial use. Table sugar (sucrose) comes from plant sources. In non-scientific use The term sugar refers to Sucrose (Also called "table sugar" or "saccharine") a white Crystalline Solid Disaccharide. Disac Commercially produced table sugar comes either from Sugar Cane or from Sugar Beet. Scientifically sugar refers To any Monosaccharide or Disaccharide. Monosaccharide (also called "simple sugars") such as glucose, store chemical energy which biological ological cells convert to other types of energy. The word "sugar" principally refers to crystalline sugars,, two important sugar crops predominate:

Sugarcane Sugar beets Difference between sugar produced from sugar beets and sugar produced from sugarcane? arcane? There is no difference in the sugar produced from either cane or beet. Sugarcane, a giant grass, thrives in a warm, moist climate, storing sugar in its stalk. The sugar beet grows best in a temperate climate and stores its sugar in its white root. Sugar from both sources is produced by nature in the same fashion as all green plants produce sugar - as a means of storing the sun’s energy.

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Sugar Cane The plants are slow growing and require approximately 16 months to ripen. Once cut, sugarcane can start to deteriorate quickly (actually within hours of being harvested) thus it must be processed immediately after cutting. Sugarcane belongs to the genues saccharum, tribe Andropogoneae, and family poaceae (Graminea). Sugar cane is really a type of giant grass. When it is fully grown, it can be as tall as four or five meters. meters Like all grasses, sugar cane has green leaves, a stalk and roots to collect sunlight, moisture and carbon dioxide which it uses to make its own food. Sugar cane grows best in tropical countries where it thrives on a combination of bright sunlight, heat, heavy rainfall and fertile soil. New cane is grown from pieces of cane stalk, Called setts, which are laid lengthwise in furrows which have been cut in the field. As the young cane grows, the land around it is cultivated to control weeds and let air and water into the soil. In moist, warm conditions, the cane grows quickly. It is usually ready to harvest in 10 to 18 months. Mature cane stands 2 to 4 metres high and is usually harvested between June and December in the Southern Hemisphere, when its sugar content is at its highest. When the first cane is harvested, the stumps are left in the ground. New canes grow from the stumps. Two or three more crops can be produced produc this way. These are called ratoon crops.

Most cane sugar comes from countries with warm climates, such as Brazil, India, China, Thailand, Mexico, and Australia, the top sugar producing countries in the world. Growing the Cane Sugar cane is a sub-tropical pical and tropical crop that prefers lots of sun and lots of water - provided that its roots are not waterlogged. It typically takes about 12 months to reach maturity although the time varies widely around the world from as short as six months in Louisiana to 24 months in some places. places Where it differs from many crops is that it re-grows re grows from the roots so the plant lasts many cycles [or 'ratoons', a word derived from the Spanish to sprout] before it is worn out. Harvesting Sugar ugar cane is harvested by chopping down the stems but leaving the roots so that it re-grows grows in time for the next crop. Harvest times tend to be during the dry season and the length of the harvest ranges from as little as 2 ½ months up to 11 months. The cane is taken to the factory: often by truck or rail wagon but sometimes on a cart pulled by a bullock or a donkey!

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Sugar beet Beet sugar comes from regions with coole climates: Northwest and eastern ern Europe, northern Japan, plus some areas in the United States (including California). Cuba, the EU, Australia, Thailand, Brazil, Ukraine (sugarbeets) and China are the largest exporters. In the Northern Hemisphere, the beet-growing beet season ends with the start of harvesting around September.

Harvesting In the growing and harvesting of sugar beet, timing is critical.

The harvesting period, known as the 'campaign' amongst farmers, takes place between September and Christmas when the amount of sugar in the beet is at its highest. Begins the middle of September and continues until Completed, usually by mid-November. mid Sugar beet was harvested at five different times (123, 139, 155, 171 & 187 days after emergence). emergence Sugar beet provides more than oneone half of sugar produced in United States and about 40% of sugar Production in the world.

Top Ten Countries by Sugar Beet Production 2008

According to the Food and Agricultural Organization of the United Nations, in 2007 the United States produced 31,912,000 tonnes of sugar beets, beets which was enough to make the United States Ranks Second in that category. France ranked first, producing 32,338,000 tonnes.

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Ethanol from Sugar More than half of world ethanol production is produced from sugar and sugar byproducts, with Brazil being by far the world leader. Currently, there is no commercial production of ethanol from sugarcane or sugar beets in the United States, where 97 percent of ethanol is produced from corn Technologically, the process of producing ethanol from sugar is simpler than converting corn into to ethanol. Converting corn into ethanol requires additional cooking and the application of enzymes, whereas the conversion of sugar requires only a yeast fermentation process. The energy requirement for converting sugar into ethanol is about half that for corn.

Factors impacting sugar to ethanol viability Corn is currently the least-cost least feedstock available for ethanol production. Ethanol from sugarcane or sugar beet feedstocks costs twice as much. USDA’s recent sugar/ethanol report provides these comparative mparative production costs. High oil prices have spurred interest in ethanol, to put it mildly. But for how long? (Prices were dropping at press deadline in September.) With ethanol prices hovering near $4 a gallon this summer, the USDA report concludes that t it would be profitable to produce ethanol from sugar and sugar byproducts. However, if ethanol prices were to drop below $2.35 a gallon, it would not be profitable to use raw or refined sugar as a feedstock. Based on current futures prices, the price of ethanol is expected to drop.

The EU convert refined sugar to ethanol Market Production and consumption Europe’s fuel ethanol sector was a slow starter. It took almost 10 years to grow production from 60 million litres in 1993 to 525 million litres litre in 2004. In the following two years we saw a true explosion in production. In 2005 and 2006 there were double-digit double growth levels of over 70%. After a moderate growth in 2007, when production increased by 13% compared to the previous year, year figures reached another spike in 2008. Last year, total EU bioethanol production significantly increased by 56%, from 1.8 billion in 2007 to 2.8 billion in 2008. Compared to the U.S.A. and Brazil, but also to the European biodiesel sector, the EU fuel alcohol sector sect is

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rather small. The USA nowadays produces every month more than the EU produce in a year. Moreover, the EU biofuel market is still predominantly a biodiesel market (80%).

The top 4 EU producers of ethanol are France, France Germany, Spain and Poland, followed wed by Sweden and the UK. The top 6 consumers are France, France Germany, Sweden, the UK, Poland and the Netherlands. Netherlands 2008 was also a record year in terms of imports. Total imports of bioethanol (fuel and nonnon-fuel) are estimated to have reached 1.9 billion litres in 2008, increasing by 400 million compared to 2007. Thereof, Thereof between 1.4 and 1.5 billion litres came from Brazil only. Approximately 50% of total imports have been used for the fuel sector (approximately 1.1 billion litres). litres This equals 39% of total EU production.

Production capacity The EU production capacity is steadily increasing. At present, the installed capacity amounts to 6.1 billion litres, litres while production capacity under construction is 2.4 billion litres. litres

Use of raw material In 2007 the preferred raw material was grain and, more in particular, wheat. A relatively big part is still covered by sugar beet (molasses) and a smaller share is produced from raw alcohol. alcohol In 2008, due to higher grain prices, we have seen a shift (mainly in Germany) to sugar beet juice. If we look at the bigger picture of grain use in the EU it becomes immediately clear that bioethanol production is only a marginal consumer of grain. Almost 69% of Europe’s cereals go to the animal feed sector whereas approximately only 2% of all cereals is destined for the bioethanol. bioethanol. Of this extremely small share about one third goes back to the animal feed sector as a high protein animal feed called DDGS. This by-product product replaces imported soya meal. meal

BRAZILIAN SUGAR Brazilian sugar is the most plentiful sugar in the world, due to the fact that Brazil is the largest producer of sugar in the world. Every year Brazil produces up to thirty million tons of sugar, much of which is sold offshore. The majority of Brazilian sugar is VHP raw sugar, which is almost always produced for export and subsequent refining in other countries. A smaller amount of ICUMSA 45 sugar is also produced both for local consumption and international export.

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Brazilian sugar exports make up 40% of total global sugar exports, which explains how Brazilian sugar comes to be found in baked goods, drinks, and other foodstuffs the world over.

Producing Brazilian Sugar Brazilian sugar is grown largely in the Sao Paulo region of Brazil. The majority of Brazil’s zil’s sugarcane is produced in the southern portion of the country. It is also produced in northeast Brazil. The State of São Paulo (map map) produces 60 percent of Brazil’s sugar and accounts for 70 percent of Brazilian sugar exports. ane production occurs between In the south, sugarcane May and November. In the northeast production occurs between September and March. The first sugar plantations and mills were founded in these states by the Dutch, who used slave labor to plant, harvest, mill and process sugar sug cane into sugar. Today there are still numerous sugar plantations and mills in this region in spite of the fact that it is considerably less fertile than the Sao Paulo region, not to mention harder to harvest due to hilly terrain. All sugar produced in Brazil is produced from sugar cane, of which there are many varieties.

Types of Brazilian Sugar for Export Brazil exports large amounts of VHP raw sugar, in fact VHP makes up the bulk of Brazilian exports. VHP is very high pol sugar, a term that means that the sugar has a high sucrose level. VHP sugar is 99.4% sucrose. sucrose Invented by Brazilians in 1993, VHP sugar quickly became the world’s most popular sugar export. Unlike other forms of raw sugar, VHP contains relatively few contaminants and is easier ier and quicker to refine than traditional raw sugar. Aside from VHP sugar, Brazil also exports refined sugars from ICUMSA 150 to ICUMSA 45. Large quantities of ICUMSA 45 especially are relatively rare, as Brazil has largely based its sugar export industry y on the export of raw sugar which is then refined in the destination country at the buyer’s expense.

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Brazilian Ethanol Production Brazil is the world’s number two ethanol producer and the leading ethanol exporter, using sugarcane as its feedstock Brazilian razilian Sugar and Ethanol Industry harvest Brazil crushed a During the 2007/2008 harvest, record amount of 496 million tons of sugarcane and produced 31 million tons of sugar and 22.5 million cubic meters of ethanol. Around two-thirds two of the sugar produced in Brazil Br (18.6 million tons) was exported, with raw sugar accounting for more than 65% of foreign sales. sales

Year * 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09**

Million Gallons 3,910 4,068 4,174 4,719 5,916 7,054

Source: GAIN report BR8013 8013, USDA Foreign Agricultural Service, 2008. U.S. and Brazilian Ethanol Comparison The United States and Brazil are the two largest ethanol producers in the world Together they account for almost 90 percent of world production.

Country USA U Brazil European Union China Canada Other Total

Million Gallons 6,499 5,019 570 486 211 316 13,102

Source: Renewable Fuels Association

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International Sugar Organization (ISO)

The ISO provides a forum for inter-Governmental inter consultations ions on key sugar issues including ways of improving the world sugar economy. Its primary objective is to ensure enhanced international cooperation in connection with world sugar matters. It also provides extensive information on the world sugar market and other sweeteners The ISO is based in London, London the 84 member states of the ISO represent (based on data for 2007): ): • • • •

82% 66% 93% 38%

of of of of

world world world world

sugar production sugar consumption exports imports

The ISO exists to administer the th internationally negotiated 1992 International Sugar Agreement (ISA), the objectives of which are: • • • •

To ensure enhanced international cooperation in connection with world sugar matters and related issues. To provide a forum for intergovernmental consultations consultations on sugar and on ways to improve the world sugar economy. To facilitate trade by collecting and providing information on the world sugar market and other sweeteners. To encourage increased demand for sugar, particularly for non-traditional non uses.

The he Global Alliance for Sugar Trade Reform and Liberalization The Global Alliance for Sugar Trade Reform and Liberalization brings together 85% of the world raw cane exports. exports The Global Sugar Alliance members (Australia, Brazil, Canada, Chile, Colombia, India, dia, Guatemala, South Africa and Thailand) are active advocates to improve the world sugar trading environment. Members work closely together to ensure the fair and equal treatment of sugar and ethanol in the WTO negotiations on agriculture so that markets market are allowed to work. The Global Alliance for Sugar Trade Reform and Liberalization was established during in November 1999. 1999 The world’s sugarcane producers have the potential to contribute significantly to the solution of two current global challenges: • Climate change and • Trade liberalization. This was the focus of the declaration signed by the Global Alliance for Sugar Trade Reform & Liberalization, Liberalization whose members met on Wednesday (Oct.21/2009) in São Paulo, Brazil to discuss matters of relevance to the the international sugarcane market. The Alliance represents over 85% of world raw sugar exports and has been an active voice in the World Trade Organization’s (WTO) Doha Round negotiations.

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World Food Price Inflation in 2007/2008 FAO Report

The upturn in international food prices that began in 2006 escalated into a surge of food price inflation around the world, increasing food insecurity, leading to violent protests and even raising fears about international security. Africa was perhaps hardest hit, but the problem was global. Reports of the impact of high food prices on the poor across many developing countries led to calls for international action to reverse the slide towards increased poverty and malnutrition. Food aid agencies such as the World Food Programme (WFP) encountered difficulties in meeting the higher costs of purchasing food for distribution and appealed for additional funds. The FAO food price index1 index rose by 7 percent in 2006 and 27 percent in 2007, and that increase persisted and accelerated ccelerated in the first half of 2008. Since then, prices have fallen steadily but remain above their longer-term trend levels. For 2008, the FAO food price index still averaged 24 percent above 2007 and 57 percent above 2006. Looking at prices in reall terms (deflated by the World Bank’s Manufactures Unit Value Index [MUV]), the increases are still significant. Real prices have shown a steady long-run downward trend punctuated by typically short-lived short price spikes. There is some suggestion of a flattening out since the late 1980s with a gradual recovery beginning in 2000 before the sharp increase in 2006 – the average annual growth rate of 1.3 percent for the period 2000–05 has jumped to 15 percent since 2006. Prices are commonly expressed in US dollars; depreciation in the value of the US dollar reduces the cost of commodities for countries whose currencies are stronger than the US dollar, resulting in a cushioning of food price increases to a greater or lesser extent. However, for countries whose wh local currencies are pegged to or are weaker than the US dollar, depreciation in the US dollar increases the cost of procuring food. More than 30 developing countries peg their currency to the US dollar.

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Did the prices of all agricultural commodities commodities increase in the same way? While almost all agricultural product prices increased at least in nominal terms, The rate of increase varied significantly from one commodity to another. In particular, international prices of basic foods, such as cereals, oilseeds and dairy products, increased far more dramatically than the prices of tropical products, such as coffee and cocoa, and raw materials, such as cotton or rubber. Therefore, developing countries dependent on exports of these latter products found that while their export earnings might have been increasing this was at a slower rate than the cost of their food imports. As many developing countries are net food importers, this imposed a serious balance of payments problem. What was different about the 2007–08 food price increases? ? The leap in food prices was in sharp contrast to the secular downward trend and the prolonged slump in commodity prices from 1995 to 2002, which even prompted calls for the revival of international commodity agreements. For or some analysts, the increases signaled the end of the long-term term decline in real agricultural commodity prices, with The Economist (2007) announcing “the end of cheap food”. Others saw the beginnings of a potential world food crisis. It is an interesting ng question whether these sharp increases are fundamentally different from earlier price spikes and whether the long-term term decline in real prices could have come to a halt, signalling a fundamental change in agricultural commodity market behaviour. High-price ice events, like low-price low events, are not rare occurrences in agricultural markets, although high prices often tend to be short-lived lived compared with low prices, which persist for longer periods. What has distinguished this episode was the concurrence of the e hike in world prices of not just a few but of nearly all major food and feed commodities and the possibility that the prices may remain high after the effects of short-term short shocks dissipate. The price boom was also accompanied by much higher price volatility2 volat than in the past, especially in the cereals and oilseeds sectors, highlighting the greater uncertainty in the markets. In the first four months of 2008, volatility in wheat and rice prices approached record highs (volatility in wheat prices was twice tw the level of the previous year while rice price volatility was five times higher). The increase in volatility was not confined to cereals – vegetable oils, livestock products and sugar all witnessed much larger price swings than in the recent past. gh volatility means uncertainty, which complicates decision-making making for buyers High and sellers. Greater uncertainty limits opportunities for producers to access credit markets and tends to result in the adoption of low-risk production technologies at the expense of innovation and entrepreneurship. In addition, the wider and more unpredictable the price changes in a commodity are, the greater is the possibility of realizing large gains by speculating on future price movements of that commodity. Page (29)

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Annual food prices, in nominal and real US$ US terms, 1957–2008 1957

Thus, volatility can attract significant speculative activity, which in turn can initiate a vicious cycle of destabilizing cash prices. At the national level, many developing countries are still highly dependent endent on primary commodities, either in their exports or imports. While sharp price spikes can be a temporary boon to an exporter’s economy, they can also heighten the cost of importing foodstuffs and agricultural inputs. At the same time, large fluctuations fluctu in prices can have a destabilizing effect on real exchange rates of countries, putting a severe strain on their economy and hampering their efforts to reduce poverty.

The end of “cheap food”? Soaring food prices came as a shock partly because consumers umers throughout the world had become accustomed to the notion of so-called called “cheap food”. Up until 2006, the real cost of the global food basket had fallen by almost oneone half in the previous 30 years, years with prices of many foodstuffs falling on average by 2–3 percent per year in real terms. terms Technological advances greatly reduced the cost of producing foodstuffs and this, Together with widespread subsidies in countries of the Organization for Economic Co-operation operation and Development (OECD) that rendered more Efficient and cheaper production elsewhere unprofitable, entrenched the Role of a few countries in supplying the world with food. This supply-driven agricultural paradigm sent real prices spiraling downward on a trend lasting for decades. Added to this, changes hanges in the market and policy setting have been Instrumental in reducing stock levels and have led to far more planned dependence on imports to meet food needs. Put together, these developments have resulted in a significant role for major exporting countries ntries to supply international markets as needed. Therefore, it is not Surprising that when production shortages occur in such countries, particularly in consecutive years, global supplies are stretched and the ensuing market tightness is manifest in both higher prices and higher volatility. This was precisely the case in the run-up run to the recent price surge. Against this backdrop, the world’s growing demand for agricultural commodities, driven by rising global incomes and population and then expansion in i biofuel production, left major exporters with little opportunity to replenish stocks. Extreme price volatility for several commodities was another factor Prompting fears of a wide-scale wide crisis.

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Sugar(World Production - Supply and Distribution) PRODUCTION World sugar production to decline by 9 million tonnes in 2008/09. FAO has revised its estimates for world sugar production to 158.5 million tonnes in 2008/09, which is 2.5 million below the first estimate released in November 2008, and 9 million tonnes, or 5.4 percent less than in 2007/08. The revision was largely caused by a deterioration of production prospects in India, where sugar output is now estimated to have fallen by a drastic 45 percent. The drop would ensue from a decline in planted area, a, as many producers allocated land to alternative, more remunerative, crops, such as maize and soybeans.

World production and consumption of sugar

2006/07

2007/08 estim

2008/09 f’cast

Change: 2008/09 Change over 2007/08

million tonnes

%

WORLD BALANCE Production

166.1

167.6

158.5

-5.4

Trade

46.7

47.3

50.2

6.0

Utilization

154.0

158.4

162.2

2.4

Ending stocks

73.3

80.9

76.3

-5.7

SUPPLY AND DEMAND INDICATORS Per caput food consumption: World

kg/year

22.5

23.1

23.4

1.3

LIFDC

kg/year

12.9

13.4

13.7

1.8

%

47.6

51.1

47.0

2007

2008

World stock-to-use ratio

2009*

Change: Jan-May 2009 Jan over Jan-May 2008 Jan

ISA Daily Price Average (United States cents/lb)

% 10.08

12.80

13.78

8.8

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In addition to India, sugar production contracted in Australia, the European Union, Pakistan and the United States, with relatively small decreases foreseen in Thailand. However, in the Latin America and Caribbean region, sugar production in Brazil (October/September) is expected expe to rise to 39.6 million tonnes in 2008/09, about 29 percent more than in 2007/08, despite heavy rains at harvest time, which reduced yields. Sugar-cane cane production is set to reach 566 million tonnes, which corresponds to a 15 percent increase from last last year, on account of a 12 percent expansion in cane planted area. It is estimated that about 60 percent of Brazil’s 2008/09 sugar-cane sugar harvest will be processed into cane-based cane based ethanol, buoyed by higher returns from domestic ethanol relative to export markets. ma However, if international sugar prices continue to augment, providing no upsurge in crude oil prices, the share of cane directed to sugar should be expected to increase. Elsewhere in the region, sugar production in Colombia is expected to increase by 3 percent in 2008/09, while it should remain relatively unchanged in Argentina and decline slightly in Peru.

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Industry structure and development

Brazil with consistent and considerable increase in cane production continues to remain the th dominant sugar producer. India is the second largest but with a chequered track record of wide swings in year on year sugar production. India however remains unchallenged as the top sugar consumer despite low level of per capita consumption. Cane sugar has steadfastly displaced beet, trouncing the share of latter from 43.5% in the 1960s s to 20% now. World sugar production during 2008-09 has displayed a discernible decline due to decisive downfall in Indian production. Accordingly world sugar balance would w turn deficit by 7.8 mln tonnes. tonnes The deficit would have loomed larger but for the relentless rise in Brazilian cane production and usage of relatively larger share of cane crop for sugar with concomitant decline in the share of ethanol. conomic recession world over, sugar consumption growth Despite the economic was less impacted and remained positive. The supply-demand supply demand disequilibrium has been caused essentially by the strident slippage in Indian production, exacerbated by the decline in EU and other Asian countries.

Source: ISO The correction after surging surplus for two years in a row has come as good relief to sugar producers world over. Such tightness in supply is sure to be witnessed during 2009-10 as well. rld export is expected to overshoot the half way mark Brazil’s share in world to 53% this year as against 29% a decade ago.

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Sugar Futures and Options Trading Located at ICE Futures U.S. in New York City, the exchange is the premiere world market for the trading of coffee, sugar sug and cocoa futures and options. Three sugar futures contracts (world raw, world refined, and domestic raw) are listed at ICE. In 1982, 1982 the exchange launched the nation's first exchange-traded exchange option on a futures contract when it introduced options on world orld sugar futures.

The Role of the Exchange Since all futures and options contracts are standardized (with delivery months and locations, quantity and grade constant), only price is negotiable. These prices are determined by "open outcry" trading on the he exchange floor. The scene on the trading floor resembles an auction of sorts, with competing buyers and sellers shouting and gesturing. While this might appear chaotic to the casual observer, the open outcry method assures that each trade is openly and competitively executed. With open outcry, all market participants are afforded the opportunity to buy or sell at the best available current price. All trading activity is closely monitored by the exchange according to guidelines established by the CFTC. FTC. The exchange is committed to maintaining markets of the highest quality. To help fulfill this self--regulatory mandate, ICE Employs advanced technological systems to perform a variety of surveillance and compliance procedures.

Trading Sugar Options In 1982, the exchange introduced options on world (#11) sugar futures - the nation's first exchange -traded traded option on commodity futures. Because options strategies are numerous and can be tailored to meet a wide array of risk profiles, time horizons and an cost considerations, hedgers and investors have increasingly realized their vast potential.

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ISO World Sugar Market Review

as at : 20 November 2009 In the third assessment of the ISO, world sugar production is put at 161.527 mln tonnes. A significant production shortfall in India and a further contraction of production in the EU, on the one hand, and a continuing expansion of sugar output in Brazil, on the other hand, are the three major supply features of 2008/09. The combined effect of output reductions in the EU and India is expected ted to shave off a massive 7.084 mln tonnes from world sugar supply, despite record high growth in sugar output in Brazil. So far, a lowering in forecasted production in India (from 23.9 mln tonnes projected in August to the current projection of 19.55 mln tonnes) has been neatly matched by a practically identical increase in Brazil (from 33.22 mln tonnes to 37.54 mln tones). Meanwhile, global consumption is forecasted to grow at the rate of 2.19% to 165.801 mln tonnes, raw value.

Jan-10 Jan Mar Mar-10 May May-10 Jul Jul-10 Oct Oct-10 Mar Mar-11 May May-11 Jul Jul-11 Oct Oct-11 Mar Mar-12

22.20 22.74 21.86 20.43 19.73 19.33 18.12 17.28 17.08 16.63

AUD/USD USD/BRL USD/THB

0.919 1.73 33.20

World production is now no expected to be 4.274 mln tonnes lower than world consumption as against 3.626 mln tonnes projected in November. November Consequently, the statistical outlook for the market till the end of the season in September 2009 remains constructive and supportive to world market values. The ISO puts world export availability for 2008/09 at 49.608 mln tonnes, raw value, as against 46.25 mln tonnes in the previous crop cycle. cycle Smaller output in importing countries and in India, in particular, is expected to trigger additional additional import demand which is estimated to reach 49.621 mln tonnes, up 3.673 mln tonnes. A summary of the third assessment of the world sugar balance in 2008/09 is provided in the table below. below

World Sugar Balance 2008/09

2007/08

(mln tonne, raw value)

Change in mln t

in %

Production

161.527

168.611

-7.084 7.084

-4.20

Consumption

165.801

162.241

3.560

2.19

Surplus / Deficit

-4.274

6.370

Import demand

49.621

45.948

3.673

7.99

Export availability

49.608

46.245

3.363

7.27

End Stocks

66.272

70.533

-4.2611

-6.04

Stocks/Consumption ratio in%

39.97

43.47

Source: ISO quarterly market outlook, outlook February 2009

Page (35)

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