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Sugar price drivers
1. Global sugar stocks
As we all know, negotiations at stock market affect all products, and low levels of stocks point to a high demand, or perhaps weak supply, or even a combination of the two.
Refined sugar is generally based on the Futures Contract of London Exchange (Euronext - LIFFE) https://www.theice.com/products/37089080/White-Sugar-Futures/data?marketId=5635706
While VHP and Cristal sugar is generally based on the most current Futures Contracts of New York (ICE Futures # 11)
2. Inflation of US dollar
When dollar become higher than it is last exchange price against the buyer’s currency > it means that he will need more of his currency to buy dollar, which is the main international trade currency, thus demand on sugar will go down.
3. Oil price
In order to understand the link between oil price and sugar price we have to know first that sugar is being made from sugar cane, which is the same source of Ethanol extraction, where ethanol is being considered as the first competitor of gasoline in the transport fuel market, thus any decrease in gasoline’s price means:
> decrease in ethanol prices
> means less demand on sugar cane to produce ethanol,
> means over-supply of raw sugar.
> means decrease in sugar price
4. Weather conditions
Sugar canes require dry atmosphere, and only countries with warm climate can produce it.
Too warm weather can affect negatively on sugar canes, and the drought can damage them. While we notice that wet weather is not also ideal for sugar cane
5. Governamental regulations
Governmental tariffs for import or export sugar have a main role as well as sugar price deriver, where high tariffs to import sugar to a specific country (to protect the national production for example) makes the export in the source country get down, which means supply has become bigger than demand, which means that sugar prices will go down.
6. Consumption trends
As the world population is growing the sugar consumption is most likely to grow
National consumption in the source country:
When national sugar consumption in brazil increases, sugar export supply decreases > sugar price increases, and vice versa.
We mean the buyer’s purchase order.
For the price of every purchase order is being defined depending on:
Time of demand: Whether the demand is in the period of peak or low sugar production.
Term of payment.
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