In addition to the 2 futures markets for sugar, New York 11 for raw sugar and London 5 for white sugar, there will be a specific European sugar future at the end of 2017.
Euronext has advanced plans through their subsidiary Matif, according to the notes of the Brussels sugar consultation of Thursday 27 April. The Matif will be quoted in euros for the supply of white sugar in Europe. This can be both beet and cane sugar. In terms of expiration dates, March, May, August and December apply. That's equivalent to London 5.
Real-time trading
The Matif, which already offers grain and canola contracts, will work with active market makers to provide instant trading and "real-time" prices. It is possible to trade in futures for the next 2 years.
The Paris stock exchange assumes that arable farmers will use it, because they already have experience with futures for wheat, maize and rapeseed. There is a difference with grain and rapeseed; the arable farmer cannot physically supply the sugar. For the arable farmer, it will therefore always be cash settlement.
Good news for sugar processors
The futures market is good news for SME sugar processors. The market is becoming more transparent for them. They can cover their risks when they conclude contracts with supermarkets for the delivery of products. Euronext started preparations 18 months ago. Sugar factories, traders and sugar processors are also involved in this. The futures market for European sugar is expected to start at the end of this year.
Implementation is crucial
Sugar trading house Limako uses the stock exchanges in London and New York. Director Daniël Kerkhof cannot yet say whether the Euronext initiative is a good idea. 'It all depends on the implementation. The interpretation is crucial; that determines whether the intended goal is achieved and whether the instrument will work.'
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