OREANDA-NEWS. October 25, 2010. Starting from October 25, 2010 FORTS, the futures and options market of RTS, will start trading on a new instrument, that is a cash-settled futures contract on raw sugar quoting in rubles per a long ton with settlements in March, May, July and October. The code of the contract in the trading system is (SUGR).The underlying asset of the contract is raw sugar, which is the main input material for sugar production.

The raw sugar market is notable for high levels of volatility, which is related to the fundamental macroeconomic forces, supply and demand balance on the sugar market, as well as to the growing investment demand from investment banks, funds and private investors.

Eugene Ivanov, a leading expert at IKAR, comments: ‘Global sugar production volume amounts to about 170 million tons. The expected volume of sugar consumption  in Russia totals 5.6 million tons, while according to IKAR’s forecasts raw sugar import volumes will increase from 1.5 and  2.1 million tons in 2009 and 2010 respectively to a minimum of 2.7 million tons in 2011 (due to the unfavorable weather for sugar beet). Raw sugar is a product which has the highest levels of volatility, with its prices sometimes fluctuating by20% each week. In 2010, raw sugar quotes varied from 30.4 to 13.7 cents per pound. These fluctuations lead to serious risks for sugar producers and consumers.’

According to Andrey Borodin, President of the Russian Union of Sugar Producers; ‘This contract may interest Russian sugar consumers and producers as an instrument for price risk hedging. The Union supports the development of the sugar derivatives market in Russia. We believe that this contract will favour the development of present deliverable futures on sugar, which was launched by us together with RTS and IKAR in 2007.’

Evgeny Serdyukov, Director of the Futures & Options Market at OJSC RTS said: ‘Cash-settled futures on raw sugar is a convenient instrument for both sectoral participants and private traders who use different trading strategies on the commodity derivatives market. Launching this contract is the next step in broadening the range of commodity contracts on the RTS futures and futures market.’