Tips on Sugar Commodity Trading, Watch Sugar Commodity Prices
Traders looking at sugar commodity trading as a way to gain exposure to commodities as an asset class have some great opportunities, particularly with global agricultural prices looking set for long term increases. In the early 1970's sugar prices surged over 60 cents a pound and by over 40 cents a pound in the early 1980's at the tail end of the 1970's commodity bull market. Following the adverse impact of the global economic crisis in 2008, commodities in general and sugar commodity prices in particular are advancing strongly again, with sugar prices are at their highest for 28 years.
There are numerous cases of serious sugar shortages as desperate consumers across Asia queue for small quantities of this key commodity. To think that while in 2007 India was a major exporter of sugar, with a surplus of five million tons, but from 2009 the country is a net importer. So what has caused this serious imbalance between world sugar demand and supply? After the shock of the global economic crisis, the US dollar is falling against other currencies and hopes of a strong rebound are causing real asset prices to be driven higher. Add in the weak monsoon season in India and very unhelpful weather for sugar plantations in Brazil, impacting adversely on sugar yields, and the result is raw sugar prices heading for a high of 25 cents a pound.
Preparing for your sugar commodity trading analysis, find out where sugar comes from, in what forms and consider the recent phenomenon that threatens to change the dynamics of global sugar commodity markets in future. Between 75-80% of sugar comes from sugarcane, produced in over 100 countries globally, largely from the tropical and sub-tropical areas of the southern hemisphere. Rainfall is important for successful crop yields, with ideally around 600 mm needed annually. In addition to bad weather, crop infestation due to pests is another variable causing a rise in sugar prices on world commodity exchanges.
Leading the pack of top producing nations is Brazil, also the largest global exporter, followed by India, China, the EU, USA and Australia. A major distorting factor in world sugar markets is subsidy regimes in the US and Europe, as they artificially drive prices higher than the world sugar price. In addition to its traditional uses in bread fermentation and in fruit and vegetable products, sugar is now increasingly used as a source of ethanol fuel.
In 2007 there was a very tight balance between supply and demand, a situation almost certain to worsen as demand is expected to surge in developing Asia, particularly in BRIC nations like China and India. The largest consumer in the world is India, which is allocating far more sugar for ethanol as an alternative fuel. The world's third largest consumer and producer is China, and it is starting from a very low base of only 7kg per annum per capita consumption compared to USA per capita consumption of 45kg per annum.
Brazil is the largest world producer and understanding this market will help your sugar commodity trading strategy. Brazil aims to avoid a sugar glut by using the potential excess sugarcane crop to produce ethanol for biodiesel, an alternative to petroleum-derived gasoline. Growing use of sugar to produce ethanol has arisen alongside increases in crude oil prices and a surge in demand for sugar in China. With high crude oil prices likely in the future coupled with growing demand, producers face huge challenges to avoid higher sugar prices.
Confident in the tips from your professional financial adviser and your chosen commodity trading system, with good internet access you can trade from almost anywhere in the world. The most heavily traded sugar futures contract globally is #11 Raw sugar futures, available on the ICE US Futures platform as is the #16 Sugar futures contract. You could also try LIFFE CONNECT, the trading platform of LIFFE, part of the NYSE Euronext Group, to trade raw sugar futures. If taking a leveraged position concerns you, why not look at a soft commodity index using an ETF. Growing sugar consumption in the BRIC economies along with rising demand for bio ethanol suggests prospects for sugar prices and sugar commodity trading look very exciting going forward. - 23223
There are numerous cases of serious sugar shortages as desperate consumers across Asia queue for small quantities of this key commodity. To think that while in 2007 India was a major exporter of sugar, with a surplus of five million tons, but from 2009 the country is a net importer. So what has caused this serious imbalance between world sugar demand and supply? After the shock of the global economic crisis, the US dollar is falling against other currencies and hopes of a strong rebound are causing real asset prices to be driven higher. Add in the weak monsoon season in India and very unhelpful weather for sugar plantations in Brazil, impacting adversely on sugar yields, and the result is raw sugar prices heading for a high of 25 cents a pound.
Preparing for your sugar commodity trading analysis, find out where sugar comes from, in what forms and consider the recent phenomenon that threatens to change the dynamics of global sugar commodity markets in future. Between 75-80% of sugar comes from sugarcane, produced in over 100 countries globally, largely from the tropical and sub-tropical areas of the southern hemisphere. Rainfall is important for successful crop yields, with ideally around 600 mm needed annually. In addition to bad weather, crop infestation due to pests is another variable causing a rise in sugar prices on world commodity exchanges.
Leading the pack of top producing nations is Brazil, also the largest global exporter, followed by India, China, the EU, USA and Australia. A major distorting factor in world sugar markets is subsidy regimes in the US and Europe, as they artificially drive prices higher than the world sugar price. In addition to its traditional uses in bread fermentation and in fruit and vegetable products, sugar is now increasingly used as a source of ethanol fuel.
In 2007 there was a very tight balance between supply and demand, a situation almost certain to worsen as demand is expected to surge in developing Asia, particularly in BRIC nations like China and India. The largest consumer in the world is India, which is allocating far more sugar for ethanol as an alternative fuel. The world's third largest consumer and producer is China, and it is starting from a very low base of only 7kg per annum per capita consumption compared to USA per capita consumption of 45kg per annum.
Brazil is the largest world producer and understanding this market will help your sugar commodity trading strategy. Brazil aims to avoid a sugar glut by using the potential excess sugarcane crop to produce ethanol for biodiesel, an alternative to petroleum-derived gasoline. Growing use of sugar to produce ethanol has arisen alongside increases in crude oil prices and a surge in demand for sugar in China. With high crude oil prices likely in the future coupled with growing demand, producers face huge challenges to avoid higher sugar prices.
Confident in the tips from your professional financial adviser and your chosen commodity trading system, with good internet access you can trade from almost anywhere in the world. The most heavily traded sugar futures contract globally is #11 Raw sugar futures, available on the ICE US Futures platform as is the #16 Sugar futures contract. You could also try LIFFE CONNECT, the trading platform of LIFFE, part of the NYSE Euronext Group, to trade raw sugar futures. If taking a leveraged position concerns you, why not look at a soft commodity index using an ETF. Growing sugar consumption in the BRIC economies along with rising demand for bio ethanol suggests prospects for sugar prices and sugar commodity trading look very exciting going forward. - 23223
About the Author:
Covering soft commodities, the author, Marianna Gomes, contributes articles to the Commodity Trading Today website, a helpful educational resource. Discover more about how you could benefit from sugar commodity trading ideas here.
posted by X - Men @ 12:11 AM
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