Tips on Sugar Commodity Trading, Watch Sugar Commodity Prices
At a time of rising global agricultural prices, what are the opportunities in sugar commodity trading for the trader or investor looking for exposure to commodities as an asset class? In 1974 this soft commodity witnessed a price spike of over 60 cents a pound and another over of 40 cents a pound in 1981, at the end of the 1970's commodity bull market. It seems the sugar market and commodities in general are no different in 2009. Following the serious global economic slowdown in 2008, markets are recovering and sugar commodity prices are at their highest for 28 years.
Serious sugar shortages across Asia are leading to long queues of consumers desperate for sugar in Pakistan and India, for example. In 2007 India was a net exporter of sugar by five million tons but by 2009 the country is a net importer. A range of factors have led to world sugar demand far outstripping supply. Following the global slowdown there are now hopes of strong recovery and together with a collapse in the US dollar against other major currencies, real asset prices are being driven higher. If you then factor in a weak monsoon in India and atrocious weather in Brazil which has affected sugar yields, the result is raw sugar prices surging towards a high of 25 cents a pound.
Firstly, as you embark on your sugar commodity trading journey, discover where sugar comes from, and see how a recent development in alternative fuels poses a challenge to global sugar commodity markets in future. With sugar produced in over 100 countries, largely from the tropical and sub-tropical areas of the southern hemisphere, around 75-80% comes from sugarcane. A key factor for successful crop yields is plentiful rainfall, and the annual optimum is around 600 mm. Sugar prices on world commodity exchanges can also be driven higher by crop infestation as a result of attacks by pests.
The top producing nations are Brazil, which is also the largest exporter in the world, India, China, the EU, USA and Australia. One key factor which distorts world sugar markets is the subsidy regime in the US and Europe, which supports producers by giving them prices higher than the world price. Sugar is used in a range of fruit and vegetable formulations, in bread fermentation, and increasingly as source material for ethanol fuel.
In 2007 there was a very tight balance between supply and demand, a situation almost certain to worsen as demand is expected to surge in developing Asia, particularly in BRIC nations like China and India. The largest consumer in the world is India, which is allocating far more sugar for ethanol as an alternative fuel. The world's third largest consumer and producer is China, and it is starting from a very low base of only 7kg per annum per capita consumption compared to USA per capita consumption of 45kg per annum.
Brazil is the largest world producer and understanding this market will help your sugar commodity trading strategy. Brazil aims to avoid a sugar glut by using the potential excess sugarcane crop to produce ethanol for biodiesel, an alternative to petroleum-derived gasoline. Growing use of sugar to produce ethanol has arisen alongside increases in crude oil prices and a surge in demand for sugar in China. With high crude oil prices likely in the future coupled with growing demand, producers face huge challenges to avoid higher sugar prices.
Armed with your chosen commodity trading system and good advice from your professional financial adviser, you can trade from almost anywhere in the world with good internet access. The #11 Raw sugar futures on the ICE US Futures platform is the most heavily traded sugar futures contract globally, followed by the #16 Sugar futures contract. It is also possible to use LIFFE CONNECT, part of the NYSE Euronext Group, to trade raw sugar futures. For those hesitant about leveraging in futures, an alternative could be to look at a soft commodity index using an ETF. Broadly speaking, higher sugar prices suggests sugar commodity trading looks very exciting going forward, given growing sugar consumption in the BRIC economies and rising demand for bio ethanol. - 23204
Serious sugar shortages across Asia are leading to long queues of consumers desperate for sugar in Pakistan and India, for example. In 2007 India was a net exporter of sugar by five million tons but by 2009 the country is a net importer. A range of factors have led to world sugar demand far outstripping supply. Following the global slowdown there are now hopes of strong recovery and together with a collapse in the US dollar against other major currencies, real asset prices are being driven higher. If you then factor in a weak monsoon in India and atrocious weather in Brazil which has affected sugar yields, the result is raw sugar prices surging towards a high of 25 cents a pound.
Firstly, as you embark on your sugar commodity trading journey, discover where sugar comes from, and see how a recent development in alternative fuels poses a challenge to global sugar commodity markets in future. With sugar produced in over 100 countries, largely from the tropical and sub-tropical areas of the southern hemisphere, around 75-80% comes from sugarcane. A key factor for successful crop yields is plentiful rainfall, and the annual optimum is around 600 mm. Sugar prices on world commodity exchanges can also be driven higher by crop infestation as a result of attacks by pests.
The top producing nations are Brazil, which is also the largest exporter in the world, India, China, the EU, USA and Australia. One key factor which distorts world sugar markets is the subsidy regime in the US and Europe, which supports producers by giving them prices higher than the world price. Sugar is used in a range of fruit and vegetable formulations, in bread fermentation, and increasingly as source material for ethanol fuel.
In 2007 there was a very tight balance between supply and demand, a situation almost certain to worsen as demand is expected to surge in developing Asia, particularly in BRIC nations like China and India. The largest consumer in the world is India, which is allocating far more sugar for ethanol as an alternative fuel. The world's third largest consumer and producer is China, and it is starting from a very low base of only 7kg per annum per capita consumption compared to USA per capita consumption of 45kg per annum.
Brazil is the largest world producer and understanding this market will help your sugar commodity trading strategy. Brazil aims to avoid a sugar glut by using the potential excess sugarcane crop to produce ethanol for biodiesel, an alternative to petroleum-derived gasoline. Growing use of sugar to produce ethanol has arisen alongside increases in crude oil prices and a surge in demand for sugar in China. With high crude oil prices likely in the future coupled with growing demand, producers face huge challenges to avoid higher sugar prices.
Armed with your chosen commodity trading system and good advice from your professional financial adviser, you can trade from almost anywhere in the world with good internet access. The #11 Raw sugar futures on the ICE US Futures platform is the most heavily traded sugar futures contract globally, followed by the #16 Sugar futures contract. It is also possible to use LIFFE CONNECT, part of the NYSE Euronext Group, to trade raw sugar futures. For those hesitant about leveraging in futures, an alternative could be to look at a soft commodity index using an ETF. Broadly speaking, higher sugar prices suggests sugar commodity trading looks very exciting going forward, given growing sugar consumption in the BRIC economies and rising demand for bio ethanol. - 23204
About the Author:
The author, Marianna Gomes, pens articles on soft commodities to the Commodity Trading Today website, a practical informational resource. Learn more about how you could benefit from sugar commodity trading here.
posted by X - Men @ 5:09 AM
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