The ‘sugar market’ comprises fructose, lactose and sucrose- i.e. edible carbohydrates. Sugar beet is the root product from mild climates like the UK, where sugar cane comes from tropical climates. These juices are then processed into the end products. Sugar commodities are traded the same as most other commodities, with its own ticker and symbol.
The Sugar market sees a constant steady growth, so sugar trading is essential for a diversified portfolio. While there is some fluctuation in the market, as with all commodities, demand for sugar is fairly high and looks set to keep growing steadily over time. In a market that demands junk food, sugary drinks and chocolate on a regular basis, it is likely to expand even more over time.
The forces of supply and demand influence all commodities. Weather and disease are the primary reasons that a sugar crop may be poor in one year and prosperous in another. Climate, natural disasters, soil quality, drought conditions and insect patterns will all impact supply as well.
Sugar has some industrial uses, in particular the growing production of ethanol, but by far the largest market for sugar products is the edible food arena. Keeping track of developments in the food industry in large consumer countries like the US can be an effective way to plot the market.
Ethanol is an interesting arena for sugar trading. Brazil is currently the largest producer of ethanol, and there is a strong focus on this product as a potential alternative to fossil fuels (ethanol is fully sustainable). If you are looking to speculate on the ‘green’ markets, this may be the focus for you.
Sugar trading has interesting futures options, and can make an interesting trading commodity in itself. There is even an ETF tracker for sugar. With the rise of sustainable fuels and its uses in food, it is an industry that is set to remain in steady growth over time, which is why we think that including sugar commodities in your portfolio is a great idea.