Within the context of financial markets, sugar trading is not the first commodity to think of. However, sugar trading can be quite profitable. Here we explain the major points of the sugar market.
What should I know about the sugar trading market?
The ‘sugar market’ includes fructose, lactose and sucrose- the edible sugars. In milder climates, such as the UK, the source plant is the sugar beet, and in tropical areas it is the sugar cane. Their juices are processed and refined into the final products. Sugar commodities are traded the same as most other commodities, with its own ticker and symbol.
Why should I choose sugar trading?
The Sugar market is constantly growing at a steady pace, which makes sugar a perfect asset for portfolio diversification. Despite some market fluctuation, which are not unusual for any commodity, demand for sugar is high and it seems that it will keep growing steadily. In a market that demands junk food, sugary drinks and chocolate on a regular basis, it is likely to expand even more over time.
What influences the price of sugar commodities?
All commodities depend on the forces of supply and demand. Also sugar crops may be affected by weather and diseases, leading to abundant or poor crops. Climate, natural disasters, soil quality, drought conditions and insect patterns all impact supply and therefore prices as well.
Sugar has some industrial uses, in particular the growing production of ethanol. This market share however is very small compared to the demand from the food and drink industry. Keeping track of developments in the food industry in large consumer countries like the US can be an effective way to plot the market.
Ethanol is a curious area for sugar trading. The largest producer of ethanol currently is Brazil, and it is being considered as a potential alternative to fossil fuels, as it is fully sustainable. If you are looking to speculate on the ‘green’ markets, this may be the focus for you.
There are futures options available for trading sugar, and it is a stable commodity to trade by itself. There is even an ETF tracker for sugar. With the rising demand for sustainable “green” fuels and the constant demand from the food industry, sugar will remain on the rise; therefore, it’s a good idea to include sugar in your portfolio.