ETF Spotlight on iPath Dow Jones-UBS Sugar ETN (NYSEArca: SGG), part of an ongoing series.

Assets: $64.2 million.

Objective: The iPath Dow Jones-UBS Sugar ETN tries to reflect the Dow Jones-UBS Sugar Subindex Total Return, which is a sub-index of the Dow Jones-UBS Commodity Index Total Return and provides returns that are potentially available through unleveraged investments in sugar future contracts.

Holdings: The fund provides exposure to sugar as measured by the Dow Jones-UBS Sugar Subindex Total Return.

What You Should Know:

  • SGG has an expense ratio of 0.75%.
  • The fund is an ETN. ETNs are debt instruments backed by the full faith and credit of the issuer. They follow an underlying index or product and anyone can buy them. Since they are debt instruments, if the issuer goes bankrupt, you become another creditor and you’ll have to get in line. [ETNs: Everything You Want to Know.]
  • The S&P rates the ETN’s issuer at AA- and Moody’s rates the issuer at Aa3.

The Latest News:

  • Sugar futures jumped last week on Brazil’s projected lower sugar output, reports Leslie Josephs for The Wall Street Journal. Brazil, the world’s largest producer of sugar, is trying to deal with dry weather and aging canes, which have resulted in poorer harvest estimates.
  • Brazilian sugarcane industry group Unica calculates that the country may produce 32.5 million tons for 2011-12, or one million tons lower than its last harvest.
  • Commercial buyers and speculators are buying into the rally on worries of poorer-than-expected sugar output for the year. Spencer Patton, founder of Steel Vine Investments, commented that the market is experiencing “a bit of a panic.”
  • U.K. sugar-trade house Czarnikow reduced its projection for the cane crush – the percentage of sugar canes processed into sugar or ethonal – to 535 million, or 7% below its previous estimates, in Brazil’s main growing region, reports Leslie Joesphs for Barron’s.
  • Infrastructure problems may impeded Brazil’s ability to export sugar, which would help drive up sugar prices. Some market participants would be unable to make deliveries on contracts and would be forced to go to the open markets or use futures.
  • Some other sugar producers will not begin harvesting sugar crops until September.

For past stories in this series, visit our ETF Spotlight category.

iPath Dow Jones-UBS Sugar ETN

Chart Source:

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.

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