In the manufacturing and sale of sugar, there are hardly no pure-play worldwide public businesses. Imperial Sugar was a publicly traded corporation until it was bought out and went private in 2012.
Traders might buy shares of Bajaj Hindusthan Ltd, India’s largest sugar producer, on the Bombay Stock Exchange or derivatives through a broker in your nation. Traders interested in sugar should check into businesses like HSY, CSAN, and TR on the NYSE.
Contracts for Difference (CFDs)
The use of a contract for difference (CFD) derivative instrument is one approach to trade sugar. Traders can speculate on the price of sugar using CFDs. The difference between the price of the shares at the time of purchase and the current price is the value of a CFD.
Sugar CFDs are available from a number of regulated brokers throughout the world. Customers make a deposit with the broker to serve as margin. CFDs offer traders the ability to gain exposure to sugar prices without having to buy shares, ETFs, futures, or options.
What is the best way to invest in sugar futures?
How to Make a Sugar Investment
- Stocks in sugar companies should be purchased. Another way to become sticky with sugar is to buy stock in a firm that sells it or is engaged in its production.
How do you go about purchasing sugar as a commodity?
Look at some of the exchange-traded funds (ETFs) that invest in the sugar sector. The physical commodity is not held by the Barclays iPath Dow Jones-UBS Sugar Total Return Sub-Index (NYSE: SGG). Instead, it tracks the Dow Jones AIG Sugar Sub-price Index’s changes. If you prefer to invest in sugar futures contracts through an ETF, look into the iPath Pure Beta Sugar (NYSE: SGAR) and Teucrium Sugar Fund (NYSE: CANE). Both ETFs are listed on the New York Stock Exchange, and you can buy or sell them using your online trading account.
What is the cost of a sugar futures contract?
Specifications for the Market 1/100 cents per pound, or $11.20 per contract Raw centrifugal cane sugar with an average polarization of 96 degrees.
Sugar futures are traded where?
The organic chemical molecule sucrose, one of several related compounds known as sugars, is the white crystalline material known as “sugar.” Glucose, dextrose, fructose, and lactose are some of these sugars. Sugars are all part of the wider group of molecules known as carbohydrates, and they all have a sweet flavor. Because it is made up of one molecule of glucose and one molecule of fructose, sucrose is referred to as a double sugar. While sucrose is found in many plants, sugarcane (Saccharum officinarum) and sugar beets have the largest concentrations (Beta vulgaris). Sugarcane has a sugar content of 7 to 18 percent by weight, while sugar beets have a sugar content of 8 to 22 percent.
Sugarcane is a perennial grass that belongs to the grass family.
Sugarcane is grown in tropical and subtropical climates worldwide, generally between the Tropics of Cancer and Capricorn.
It thrives in hot, humid conditions with plenty of rain followed by a dry season.
Florida, Louisiana, Texas, and Hawaii are the top cane producers.
Sugarcane is cultivated commercially from cuttings or sections of the stalk rather than seeds.
Sugar beets are annuals that are cultivated from seeds in moderate or colder areas.
Moderate temperatures and well distributed rainfall are ideal for sugar beets.
In the spring, beets are planted, and in the fall, they are harvested.
The sugar is found in the root of the beet, yet beet and cane sugars are identical.
Sugar beets are mostly grown in Europe, the United States, China, and Japan.
Minnesota, Idaho, North Dakota, and Michigan are the states that produce the most sugar beets.
White sugar is made from sugar beets, and only a small amount of raw sugar is produced.
Sugar beets and sugarcane are grown in more than 100 nations worldwide.
Sugar beets account for around 25% of total sugar production, while sugar cane accounts for the remaining 75%.
Sugar output from cane has been on the rise in comparison to sugar production from beets.
The relevance of this is that sugarcane is a perennial plant, whereas sugar beet is an annual, and as a result of the longer production cycle, sugarcane production and the sugar extracted from it may be less susceptible to price fluctuations.
The ICE Futures U.S. exchange, the Bolsa de Mercadorias y Futuros (BM&F), the Kansai Commodities Exchange (KANEX), the Tokyo Grain Exchange (TGE), and the ICE Futures Europe exchange all trade sugar futures.
The ICE Futures U.S. exchange trades raw sugar, while the ICE Futures Europe exchange trades white sugar.
The No. 11 (World) sugar contract on the ICE market is the most actively traded.
The No. 11 contract requests for the supply of 112,000 pounds (50 long tons) of raw cane centrifugal sugar from any of 28 foreign nations and the US.
The No. 14 sugar contract (Domestic) is likewise traded on the ICE exchange, and it calls for the delivery of raw centrifugal cane sugar in the United States.
White sugar futures are traded on the London International Financial Futures Exchange and require the delivery of 50 metric tons of white beet sugar, cane crystal sugar, or refined sugar of any origin from the current crop.
Supply – World centrifugal (raw) sugar output is predicted to reduce -3.2 percent yr/yr to 174.140 million metric tons in the 2019/20 marketing year (October 1 to September 30).
Brazil is predicted to be the world’s largest sugar producer in 2019/20, accounting for 16.9% of global production, followed by India (16.8%) and the European Union (10.3%).
Sugar production in the United States is predicted to drop -3.2 percent year over year to 8.159 million metric tons in 2019/20.
Cane sugar output in the United States is predicted to increase by 2.5 percent to 4.129 million short tons in 2019/20, while beet sugar production is expected to increase by 1.0 percent to 5.005 million short tons.
In 2019/20, world ending stocks are predicted to climb by +5.3 percent year on year to a new high of 55.501 million metric tons.
Demand – In 2019/20, global domestic consumption of centrifugal (raw) sugar is predicted to increase by 0.8 percent year on year to 174.684 million metric tons, a new high.
Sugar disappearance (consumption) in the United States is predicted to be nearly stable year over year in 2019/20, at 12.340 million short tons.
Trade – World centrifugal sugar exports are predicted to drop -5.3 percent year on year to 54.856 million metric tons in 2019/20, down from a record high of 64.262 million metric tons the previous year. Brazil, Thailand, and India are the world’s top sugar exporters.
Sugar exports in the United States are predicted to remain flat year over year in 2019/20, at 25,000 short tons, down from a three-decade peak of 422,000 in 2006/07. Sugar imports into the United States are predicted to drop 5.2 percent year on year to 2.816 million metric tons in 2019/20.
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What exactly is the distinction between sugar 11 and sugar 16?
- The InterContinental Exchange (ICE) trades sugar futures in the contract months of January, March, May, July, and October.
- Sugar futures are traded as sugar no. 11, with prices reported in US dollars per pound and a $0.0001 per pound minimum variation.
- Sugar no. 11 is the most widely traded commodities futures contract, whereas sugar no. 16 is used to supply cane sugar from the United States or other duty-free countries in bulk to New York, Baltimore, Galveston, New Orleans, or Savannah.
- Sugar is a major source of ethanol production, hence crude oil futures prices and ethanol demand have an impact on sugar futures prices globally.
Is sugar a good investment?
Sugar is a very volatile commodity, thus trading it could result in significant profits or losses. Consider the following three long-term trends:
- Sugar production could be disrupted as a result of global warming trends, resulting in supply shocks.
- Oil and gasoline demand may fall in the next decades, whereas ethanol demand may rise. Overuse of fossil fuels, along with rising environmental concerns, could expedite this trend and raise sugar costs.
Risks of Trading in Sugar
- The US dollar’s strength could cause commodity prices to fall across the board.
- Sugar subsidies increased by the government could result in an oversupply that outnumbers demand.
- Sugar substitutes like aspartame and stevia may shift consumer preferences away from sugar.
- Sugar is a volatile commodity that could fall in price without warning.
Is there an ETF for sugar?
Overview of the Sugar ETF Sugar ETFs manages $54.56 million in assets through two ETFs that are traded on US exchanges. 1.17 percent is the average expense ratio. ETFs that invest in sugar are available in the following asset classes: Commodities.
Commodities Futures
Buying and selling contracts on a futures exchange is the most common way to trade commodities. The way it works is that you engage into a contract with another investor depending on the price of a commodity in the future.
For example, you might commit to buy 10,000 barrels of oil at $45 a barrel in 30 days under a commodity future contract. You don’t transmit the physical items at the end of the contract; instead, you close it out by taking an opposing position on the spot trading market. When the futures contract expires, you would close the position by entering another contract to sell 10,000 barrels of oil at the current market price.
You will earn if the spot price is greater than your contract price of $45 per barrel, and you will lose money if it is lower. If you had entered a futures contract to sell oil, on the other hand, you would profit when the spot price fell and lose money when the spot price rose. You have the option to close out your position before the contract expires at any time.
To invest in futures trading, you’ll need to open an account with a speciality brokerage firm that specializes in these transactions.
“Traders who have an account with a brokerage business that offers futures and options can access these markets,” says Craig Turner, senior commodities broker at Daniels Trading in Chicago. Each time you start or end a position in commodity futures, you will owe a commission.
Physical Commodity Purchases
You are not purchasing or selling the physical commodity when you trade futures contracts. Futures traders do not take delivery of millions of barrels of oil or herds of live cattlefutures are solely based on price fluctuations. Individual investors, on the other hand, can and do take actual custody of precious metals like gold and silver, such as gold bars, coins, or jewelry.
These investments expose you to commodity gold, silver, and other precious metals while also allowing you to feel the weight of your money. However, transaction costs for precious metals are higher than for other assets.
“This method is only viable for commodities with a high value density, such as gold, silver, or platinum. “Even then, investors will pay huge markups on the retail market over spot prices,” Giannotto warns.
Commodities Stocks
Another alternative is to purchase the stock of a commodity-related company. If you want to invest in oil, you could buy stock in an oil refining or drilling company; if you want to invest in grain, you could buy stock in a huge agriculture company or one that distributes seeds.
The price of the underlying commodity is tracked by these types of stock investments. If oil prices rise, an oil business should become more profitable, causing its stock price to rise as well.
Because you aren’t wagering on the commodity price, investing in commodity stocks is less risky than investing directly in commodities. Even if the commodity’s value falls, a well-run business can still generate money. However, this is true in both directions. While increased oil prices may improve an oil company’s stock price, other factors such as management and overall market share also have a role. If you’re searching for an investment that closely matches the price of a commodity, buying stocks isn’t the best option.
Commodities ETFs, Mutual Funds and ETNs
Commodity-based mutual funds, exchange-traded funds (ETFs), and exchange-traded notes (ETNs) are also available. These funds pool money from a large number of small investors to create a huge portfolio that attempts to track the price of a commodity or a basket of commoditiesfor example, an energy mutual fund that invests in a variety of energy commodities. The fund may purchase futures contracts to monitor the price, or it may invest in the stock of various commodity-exposed companies.
“Commodity ETFs have genuinely democratized commodities trading for all investors,” adds Giannotto. “They are low priced, easily accessible, and very liquid.”
You can acquire access to a much wider choice of commodities with a minimal investment than if you tried to establish your own portfolio. Plus, the portfolio will be managed by a professional investor. However, you’ll have to pay the commodity fund a higher management charge than you would if you made the investments yourself. Furthermore, depending on the fund’s strategy, the commodity price may not be accurately tracked.
Commodity Pools and Managed Futures
Private funds that invest in commodities include commodity pools and managed futures. They’re similar to mutual funds, except that many of them aren’t publicly traded, so you have to get permission to invest in them.
These funds can employ more advanced trading methods than ETFs and mutual funds, resulting in larger returns. In exchange, managerial costs may be increased.
Commodity vs Stock Trading
Leverage is far more widespread in commodity dealing than in stock trading. This means you only put down a portion of the investment’s total cost. Instead of putting down the entire $75,000 for the full value of an oil futures contract, you might put down 10%, or $7,500.
According to the contract, you must maintain a minimum balance based on the expected value of your trade. If the market price begins to move in a direction where you are more likely to lose money, you will be subject to a margin call and will be asked to deposit additional funds to bring the trade back to the required minimum value.
“Trading on margin can result in higher profits than the stock market, but due to the leverage used, it can also result in higher losses,” Turner explains. Small price changes can have a large impact on your investment return, so there’s a lot of room for profit in the commodity market, but there’s also a lot of room for loss.
Commodities are also a short-term investment, particularly if you enter a futures contract with a specified expiration date. This is in contrast to stocks and other market assets, where it is more typical to buy and hold assets for a long time.
Furthermore, because commodities markets are open nearly 24 hours a day, you have more time to make trades. When trading stocks, you should do so during regular business hours, when the stock exchanges are open. Although premarket futures provide some early access, most stock trading takes place during regular business hours.
Overall, commodity trading is riskier and more speculative than stock trading, but it can also result in faster and higher rewards if your positions succeed.
What exactly is sugar #16?
The Sugar No. 16 contract meets the hedging needs of sugar producers, end consumers, and merchants in the United States. The contract specifies the price of physical delivery of raw cane sugar cultivated in the United States (or foreign origin with duty paid by the deliverer) to one of five U.S. refinery ports chosen by the receiver.