Are visions of sugar funds dancing in your head? Coffee and sugar exchange traded notes (ETNs) have surged in recent weeks, driven by greater demand and shrinking stockpiles.
- Last Friday, coffee prices closed at their highest price since June 1997 after a 7.5% rally, reports Leslie Josephs for The Wall Street Journal. Coffee prices were pumped after the deluge that hit Colombia, the world’s largest producer of mild washed arabica beans, and poor weather across Central America disrupted supply.
- Bad weather in Australia, lower-than-expected exports from India, the world’s second largest producer of sugar, and weather damage to Florida’s sugarcane crop have also pushed up prices for sugar.
iPath Dow Jones UBS Sugar TR sub-Index (NYSEArca: SGG) and iPath Dow Jones AIG Coffee TR Sub-Index ETN (NYSEArca: JO) reacted in kind, too. SGG shot up 12.6% last week, while JO gained 8.7%. [How ETNs Work.]
According to a Bloomberg survey, five of 12 traders, analysts and brokers expect raw sugar prices will remain steady while four say prices will rise and three forecast a drop, write Stephen Morris and Elizabeth Campbell for Bloomberg. Jack Scoville, V.P. at Price Futures Group Inc., believes that “the overall fundamentals remain pretty bullish.”
No doubt, these funds are on a tear right alongside the broader commodities space. If you’ve been looking for a chance to allocate to a commodity with strong fundamentals, consider one of these once you have an exit strategy in place. Sugar has been active this year, but it won’t last forever.
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.