The sweetness of sugar trading
It may not be the first thing you think about when you consider financial market, but the sugar commodity has a very high potential. We will now share with you some of its secrets.
Sugar stands for edible carbohydrates. Hence the sugar market is the market of sucrose, lactose, and fructose. Sugar comes from sugar beet or sugar cane, where sugar beet grows in moderate climates (e.g. the United Kingdom), and sugar cane grows in the tropics. The juices of these plants are the source of sugar. Trading with sugar is similar to any other commodity trading.
This is a consistently growing market, with demand increasing and likely to further increase in the future. As with any market, there are fluctuations in prices, yet sugar trading is excellent for portfolio diversification in a world that increasingly demands chocolate, junk food and sugary drinks.
Supply and demand, naturally, are important for sugar, like for any other commodity. The supply is influenced by disease and by the climate, and may be excellent in one year, and sparse in the following one. Insects, natural disasters, and the quality of soil, are also important influencers of sugar trading.
Most sugar goes towards food. This is why it’s good to follow developments of the food industry in countries where sugar demand is high –like, for example, the United States.
Additional to the food industry, sugar also feeds into other industries – for example ethanol can be produced from sugar, and is an interesting market in itself. The biggest ethanol producer nowadays is Brazil. Research into this product as an alternative source of energy is ongoing. If you’re interested in ‘green’ markets then you could look into ethanol.
Sugar’s future is surely exciting – you even have a sugar ETF tracker! The sugar market will remain steady over time, considering the constant demand for sugar from the food industry, its potential to start being used as a sustainable fuel source. We do believe sugar is a good way to diversify and sweeten your portfolio.