"We have appointed a committee to look into the desirability and design of such contract," Tim Barry, vice president of product development at the exchange, said late last week.

"But it's still early in the process. We're still mailing the survey to participants in the industry because we want to get as much input as possible from everybody," he said.

He noted the survey being mailed out includes some draft specifications, such as trading units, delivery units and locations.

For example, the preliminary draft calls for a trading unit, or contract, representing 40,000 pounds of refined sugar; delivery requirements of five contracts, or 200,000 pounds, in bulk, via rail car.

Barry said that before deciding whether to proceed with such a contract, the Nybot must assess if the contract could achieve the desired liquidity, both in terms of outright volume and the number of users.

He said there's no deadline yet for a possible contract launch and all U.S. industry participants are invited to express their views, via email to tbarry@Nybot.com.

Industry Debates Likely Liquidity Of Contract

The contract has been discussed in the industry for months.

"Potentially there's enough interest in the market and the principles are there," Frank Jenkins, president of Connecticut-based Jenkins Sugar Group and chief operating officer of Sugarnetwork.com, told Dow Jones recently.

"We have enough volatility and a lack of a good price-discovery mechanism," which makes the contract viable, Jenkins said.

Some food processors say that a contract for refined sugar would help minimize the volatility of the product, the price of which can vary by up 8 cents, a wide differential considering refined sugar prices are around 23.50 cents a pound.

Others remain skeptical about the initiative, as they doubt there would be enough liquidity. They cite the fact that the number-14 contract for domestic raw sugar traded at the CSCE has very little liquidity - with only about 200-300 contracts traded daily.

"That's definitely a problem, and I think this (refined sugar futures contract) is viewed as a potential solution to that, because simply you have a four-to-five million-ton raw sugar market in the U.S. and a 10-million refined sugar market," one source said.

"Everyone who processes sugar can use a refined sugar contract, but only the guys who produce raw sugar can use the raw sugar contract...so there's potential that you can have a more liquid market," he said.

However, some participants say that beet producers, who normally produce refined sugar, aren't as amenable to the idea of having a contract for refined sugar because if it becomes widely used they will lose their tight grip on market prices.

Several U.S. sugar producers contacted by Dow Jones Newswires declined to comment.

At the Washington-based American Sugar Alliance, Jack Roney, director of economics of public policy said the group has "no position" on the possible new futures contract. The ASA is a lobbying group that represents sugar beet and cane producers and corn growers.