The U.S. Sugar Market: Why TRQs Matter and How CTRMs Must Capture Them

Introduction

The U.S. sugar market operates differently than many other commodities. While global sugar trades on the world stage through the ICE No. 11 contract, the U.S. has its own domestic price, reflected in the ICE No. 16 contract. The difference between the two markets is largely explained by Tariff-Rate Quotas (TRQs), which limit how much sugar can enter the U.S. at low or zero duty.

For sugar traders, refiners, and importers, TRQs are as critical as the physical sugar itself. Managing them incorrectly can mean missed opportunities, over-exposure, or costly compliance issues. This is why CTRM systems must be able to track TRQs as carefully as physicals and derivatives.

The Dual Market: No.11 vs No.16

No. 11, World Market: The global benchmark for raw sugar, reflecting FOB pricing at major export origins (Brazil, Central America, etc.).

No. 16, U.S. Domestic Market: The domestic price for raw cane sugar delivered into the U.S., typically higher due to tariff protections.

The spread between No. 11 and No.16 reflects U.S. market protection and the scarcity of low-duty quota sugar.

What is a TRQ?

A TRQ allows a certain volume of sugar from specific origins to enter the U.S. at reduced or zero tariffs. Imports above that quota face punitive tariffs, making them uneconomical. Each TRQ shipment requires a Certificate of Quota Eligibility (CQE), which is effectively a license or a ticket that allows physical sugar to be sold at domestic pricing.

Why TRQs are Important?

1. Price Impact: Sugar with CQE trades at the higher domestic price instead of world prices.

2. Flexibility: CQEs can be stripped from physical sugar and reassigned, meaning they behave like a commodity themselves.

3. Risk Management: The spread between No.11 and No.16 becomes a key risk exposure.

4. Compliance: Incorrectly allocating CQEs risks regulatory non-compliance and financial loss.

How CTRMs Should Capture TRQs

A robust CTRM system must:

1. Model TRQs as Commodities: CQEs need to be tracked in inventory just like physical sugar.

2. Split Positions Automatically: Each TRQ-linked purchase creates three entries:

·       World Physical Sugar (long, hedged with No.11).

·       CQE License (short, hedged with No.11 long).

·       Domestic TRQ Sugar (long, hedged with No.16 short).

3. Mark-to-Market Correctly:

·       World sugar: No.11 flat

·       CQE: No.16 – No.11 - freight

·       TRQ sugar: No.16 flat

4. Provide License Utilization Reporting: Remaining CQE balance vs applied sugar volumes.

Beyond CTRM: opsPhlo as CTRM + ERP

While most CTRMs focus narrowly on trade capture and risk, opsPhlo goes further. It is both a CTRM and an ERP platform, combining:

• Trade Management (physicals, derivatives, TRQs)

• Logistics Management (inventory management, storage, transport, documentation)

• Financial Management (accounts, settlements, treasury, FX, credit)

This integration provides end-to-end transparency across the entire lifecycle: from contract creation, TRQ license allocation, and shipment execution, through to invoicing, hedging, and P&L reporting.

With opsPhlo, firms gain:

1. A single source of truth linking trading, operations, and finance.

2. Real-time visibility into positions and risk exposures.

3. Full profitability analysis across contracts, licenses, and logistics chains.

4. Audit ready compliance for regulated markets like U.S. sugar.

The U.S. sugar market illustrates how regulatory mechanisms like TRQs transform the trading landscape. For market participants, it is not enough to track physical sugar and futures, CQEs must be modelled, valued, and managed as core elements of the trade book.

A CTRM alone can’t support this. But with opsPhlo’s CTRM + ERP capabilities, sugar traders and importers get complete visibility from origin to delivery, from quota to invoice, and from hedge to profitability, ensuring that every ton of sugar and every license is managed with precision.