News ArticleArticle Directory

With global agricultural prices looking set for long term increases, sugar commodity trading offers the trader or investor keen for exposure to commodities as an asset class some great opportunities. Just consider in 1974 sugar prices spiked over 60 cents a pound and in 1981 by over 40 cents a pound as the 1970′s commodity bull market ended. And in 2009 commodities in general and sugar commodity prices in particular are advancing strongly again. The serious 2008 world economic slowdown is now giving way to strong recovering markets and sugar commodity prices are at their highest for 28 years.

Across Asia consumers are having serious difficulty finding sugar because of the severe shortages. Consider that in 2007 India was a five million tons net exporter of sugar yet two years later it has become a net importer by a similar amount. Global sugar demand is outstripping supply, caused by a series of factors. A collapse in the US dollar against other major currencies and hopes of a global recovery are driving real asset prices higher. Add to that very bad weather in Brazil and a weak monsoon in India has affected yields which results in raw sugar prices moving towards an historic high of 25 cents a pound.

As part of our sugar commodity trading analysis, let’s see where sugar comes from, in what forms and at the new dynamic that promises to make a profound change to future world sugar commodity markets. Sugar is produced in over 100 countries worldwide, with between 75-80% made from sugarcane, mainly in tropical and sub-tropical areas in the southern hemisphere. A key factor in successful crop yields is rainfall, with an annual minimum of around 600 mm. Apart from adverse weather conditions, another factor that can cause sugar prices on world commodity exchanges to rise is crop infestation 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.

Balance between supply was quite tight in 2007 and seems almost certain to remain or worsen as demand is projected to grow in developing Asian nations, particularly the BRIC nations like China and India. India is the largest consumer in the world and it is growing its use of sugar for ethanol as an alternative fuel. China is the world’s third largest consumer and producer, with its per capita sugar consumption increasing from a very low base of around 7kg per annum (US per capita consumption of 45kg per annum).

You will help your sugar commodity trading strategy by getting to know about the Brazilian market, the largest world producer. This country’s strategy is to avoid a sugar glut by taking any surplus sugarcane crop to produce ethanol for biodiesel for export and domestic consumption. More sugar is being channelled for ethanol as crude oil prices rise, along with sugar demand surges in China. There are major challenges for sugar producers going forward, given the likely high crude oil prices in future coupled with growing demand, seeing sugar prices remaining high.

With your chosen commodity trading system and advice from your professional financial adviser, you can trade from almost anywhere in the world with good internet access. #11 Raw sugar futures is the most heavily traded sugar futures contract in the world, available on the ICE US Futures platform as is the #16 Sugar futures contract. Alternatively, you can trade raw sugar futures on LIFFE CONNECT, the trading platform of LIFFE, part of the NYSE Euronext Group. Also look at soft commodity indexes using an ETF which may not involve taking a leveraged position. With the growth in bio ethanol demand and sugar consumption in the BRIC economies, prospects for sugar prices and sugar commodity trading look very exciting in the years ahead.

Focusing on soft commodities, the author, Marianna Gomes, contributes articles to the Commodity Trading Today website, a practical informational resource. Discover more about how you could benefit from sugar commodity trading ideas here. Visit the Uber Article Directory to get a totally unique version of this article for reprint.

Tags: commodities, Investment, markets, trading