Sugar ETFs Breaking Away from Commodities Slump

While the broader commodities market has been retreating in the face of a stronger U.S. dollar, sugar futures and related exchange traded funds jumped Tuesday.

On Tuesday, the iPath Bloomberg Sugar Subindex Total Return ETN (NYSEArca: SGG) rose 4.5% and Teucrium Sugar Fund (NYSEArca: CANE) gained 4.8%. Over the past three months, SGG increased 24.1% and CANE advanced 12.4%. In contrast, the PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC), which includes a heavy tilt toward energy commodities, dipped 4.2% over the past three months.

ICE Sugar #11 futures contracts were trading 5.2% higher to $0.1471 per pound Tuesday.

Sugar prices are sweetening in response to improving fundamentals. Annual production this year may fall below global consumption for the first time in five years, helping bring down a sugar glut that pushed prices to a seven-year low in August, the Wall Street Journal reports.

The International Sugar Organization projects the sugar market will have the first “statistical deficit” this year as current production falls short of demand by 3.5 million tons. However, there is no shortage of sugar around the world due to excess inventories from a four-year buildup.

“We have seen the longest bear market in sugar for quite some time,” Michael McDougall, director of commodities for Société Générale, told the WSJ. “It’s like a large ship that takes a lot to turn. But it looks like it’s finally beginning to turn.”

A modest recovery among emerging market sugar producers, notably those in Brazil and India, has helped strengthen currencies against the U.S. dollar and bolstered sugar prices.