Keep an Eye on These ETPs as Sugar Demand Drops During COVID-19

It’s been more bitter than sweet for commodity traders in sugar who were expecting increased prices on rising demand. Bloomberg research shows that amid lockdown restrictions due to COVID-19, consumers have had less of a sweet tooth—a possible byproduct of restaurants, bakeries, and other eateries closing.

Speaking to the closures of these public places, a Digital Journal article noted that these closing “measures mean that for the first time in four decades sugar demand drops. This is based on data collated by the Czarnikow Group. In terms of the scale of the fall in demand, drink and confectionery sales at such big corporations as Coca-Cola Co. and Nestle SA have plummeted (in April, for example, Coca-Cola sales fell 25 percent).”

“Sugar consumption is in focus as the most recent commodity to exhibit rapidly falling demand associated with COVID-19 and global lockdowns, but it is by no means an outlier among consumer products and ingredients,” said Lux Research’s Director of Research, Sara Olson. “Periodic fluctuations in demand are commonplace, but COVID-19 is having once-in-a-generation impacts on consumption that are accelerating the need for commodity companies to learn how to do more with less – namely, how to grow their businesses from shrinking top-line sales.”

Here are a couple of ETPs to watch:

  1. Teucrium Sugar (CANE): seeks to have the daily changes in the NAV of the fund’s shares reflect the daily changes in the sugar market for future delivery as measured by a weighted average of the closing settlement prices for three futures contracts for No. 11 Sugar (“Sugar Futures Contracts”) that are traded on the ICE Futures US (“ICE Futures”). The fund seeks to achieve its investment objective by investing under normal market conditions in Benchmark Component Futures Contracts. Under normal market conditions, the manager expects that 100% of the fund’s assets will be used to trade Sugar Futures Contracts and invest in cash and cash equivalents.
  2. iPath Series B Bloomberg Sugar Subindex Total Return ETN (SGG): seeks return linked to the performance of the Bloomberg Sugar Subindex Total ReturnSM. The ETN offers exposure to futures contracts and not direct exposure to physical commodities. The index is composed of one or more futures contracts on the relevant commodity (the “index components”) and is intended to reflect the returns that are potentially available through (1) an unleveraged investment in those contracts plus (2) the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.

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