Concern over a disruption in supply of sugar, coupled with higher domestic demand, has sent sugar prices and the sugar-related exchange trade note (ETN) to a new high.
Potential weather damage to sugar crops in Brazil, the world’s largest producer, helped push sugar prices to its highest price in almost eight months, with coffee and cocoa prices following suit, reports Leslie Patton for BusinessWeek. The U.S. Department of Agriculture projects Brazil will harvest 3.2% less sugar can than previously estimated.
The USDA also calculates that the United States will consume 115,00 metric tons more sugar on “strong demand for imported sugar.” Fuel makers are demanding more sugar as U.S. corn supplies decrease – low corn supplies translates to higher ethanol prices, which also affects the sugar market. [7 Top ETFs in the Third Quarter.]
Raw sugar for March delivery settled at 26.32 cents per pound on Friday, and prices have surged 13% last week alone. Sugar prices have jumped 83% since June 1.
Arabica-coffee futures for December delivery increased to $1.8215 a pound in New York, or up 0.6% last week. Cocoa futures for December delivery hit $2,803 a ton in New York, or up 0.7% last week. [Coffee ETN Perks Up On Bean Shortage.]
- iPath Dow Jones AIG Cocoa ETN (NYSEArca: NIB)
- iPath Dow Jones AIG Coffee TR Sub-Index ETN (NYSEArca: JO)
Consequently, the sugar ETN was the top-performing ETF last week. The iPath Dow Jones UBS Sugar TR sub-Index (NYSEArca: SGG) increased more than 6% on Thursday after reports of supply disruptions in India, according to MarketWatch. SGG has gained more than 20% over the last month as commodities rallied on a weaker dollar.
For more information on commodities, visit our commodity ETFs category.
Max Chen 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.