Commodity ETF Spotlight: Sugar

August 29th at 12:38pm by Tom Lydon

Overall production and consumption of sugar has risen substantially on a global level since the 1990s. The growing demand from emerging markets has since led to the  development of  sugar exchange traded products, giving investors a way to access this area of the commodity market.

“As with all commodities, investors thinking about moving into the sugar market must get a grasp on the fundamentals of the industry. Despite its wide geographic spread, sugar production is concentrated in just a few countries. The leading producer is Brazil, which accounts for over 22% of global production, followed by India with 15%, Europe with 10% and China with 8%,” Commodity HQ wrote. [ETF Spotlight: SGG]

India and China are the world’s largest consumers of sugar, however, production increases have been difficult to pace due to odd cyclical weather patterns, and unpredictable government policies in producer countries such as Brazil.

The commodity market has taken off this Summer, but some have outperformed more than others. Corn and soybeans have been on a run, while coffee and industrial metals have seen weakness, explains Eric Dutram for Zacks. Sugar started the Summer off with decent performance, but has since fallen into the “worst performing” category over the past 4 weeks. [Sugar ETF Pace Gains in Commodities]

By nature, sugar prices are unstable. Brazil is the world’s largest sugar producer and weather conditions for production are favorable. Many analysts think that solid production will force traders to sell more contracts. Also, in India, sugar exports are fluid but the country could face a drought next growing season and if domestic demand picks up there will be a shortage in global supply.  [ETF Chart of the Day: Sugar]

For those investors that are feeling bullish on the sugar outlook, the iPath DJ AIG Sugar ETN(NYSEArca: SGGis the most popular exchange traded note that tracks sugar futures contracts.

iPath DJ AIG Sugar ETN

 

Other Sugar ETPs:

  • iPath Pure Beta Sugar ETN (NYSEArca: SGAR)
  • Teucrium Sugar Fund (NYSEArca: CANE
Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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