Trading strategy

1. MARKETS MANIA: SUGAR
FUTURES CALENDAR
SPREAD
Divyansh Joshi
Rohitaksh Agrawal
Vikas Chenna

2. C O N T R A C T
S P E C I F I C AT I O
N S
Contract Size: 112,000 pounds of raw cane
sugar.
Market Symbol: SB
Price quote: 1/100 cent/pound, equivalent
to $11.20 per contract.
Delivery months: March(H), May(K), July(N),
and October(V).
Underlying commodity: Raw centrifugal
cane sugar based on 96 degrees average
polarization.
Delivery location: A port in the country of
origin or in the case of landlocked
countries, at a berth or anchorage in the
customary port of export.
Markets Mania: Sugar Futures calendar spread
2

3. FA C T O R S A F F E C T I N G
• USD/BRL exchange rate. If the USD/BRL exchange rate increases, the price of sugar in Brazilian
reals will decrease. This is because it will be more expensive for Brazilian producers to sell sugar
in US dollars. Conversely, if the USD/BRL exchange rate decreases, the price of sugar in
Brazilian reals will increase. This is because it will be cheaper for Brazilian producers to sell sugar
in US dollars.
• When Brazil's sugar production is high, the supply of sugar increases, which can lead to lower
prices for sugar futures. Conversely, when Brazil's sugar production is low, the supply of sugar
decreases, which can lead to higher prices for sugar futures. These can be tracked using UNICA
REPORTS. Unica Sugar Reports are a series of publications produced by Unica, the Brazilian
Sugarcane Industry Association. The reports provide information on a variety of topics related to
the sugarcane industry, including: Sugar production, Ethanol production, Biodiesel production,
Sugarcane prices.
• WTI Crude Prices: Sugar can be used to produce ethanol, which is a type of biofuel. The demand
for ethanol can affect the price of sugar, as higher demand for ethanol can lead to higher demand
for sugar.
Markets Mania: Sugar Futures
calendar spread
3

4. S P R E A D :
S B V 2 3 - S B K 2 4
• RSI indicates the current markets are oversold
and explains the bearish trend
• Currently, the market is trading at the lower
line of the Bollinger Bands and MA10(-0.15)
looks close to MA20.(-0.13), indicating
potential convergence & trend change
• Furthermore, only this particular spread is
trading negative(i.e. prices for futures are
decreasing down the calendar) and as far as
Unica reports are considered, there is no
explanation along production lines to explain
anything of that sort.
• USD/BRL rates imply strengthening of BRL &
hence a short term increase in sugar spot
prices as well. This is also because of the
recent rating upgrade of Brazil to BB from BB-
by Fitch Ratings.
• The spread can be bought(i.e. buy SBV23
futures and sell SBK 24 futures) at the time
MA10 & MA20 are equal with the stop loss
being set at MA20-0.05 level & for a target
price of the upper line on the Bollinger Bands
Markets Mania: Sugar Futures
Calendar Spread
4

5. THANK YOU
Divyansh Joshi
Rohitaksh Agrawal
Vikas Chenna