Trades for the sweet tooth: Sugar.

Sugar is not a commodity one would directly associate with financial markets, but in fact, this market has a lot of untapped potential. This article reviews in brief the specifics of sugar trading.


The basics

The sugar market encompasses all edible carbohydrates, including fructose, lactose, sucrose, etc. The raw material involved in their production is sugar beet for moderate climates and sugar cane in warmer regions of the planet, which is harvested and processed to manufacture the end products. Sugar commodities have their own ticker symbol and are traded just like any other commodities on the market.


The benefits

The sugar market is constantly expanding, so sugar commodities make a good addition to any diversified portfolio. As any other market, some fluctuations are inevitable, but demand is relatively high and stable, with a growing trend. After all, demand for sugary snacks, chocolate delicacies, and soft drinks is not going anywhere.


How sugar prices are formed

As with any commodity, supply and demand play a significant role. Weather and diseases affect sugar crops causing variations in available quantities from one year to another. Supply also depends on local climate and soil quality in different regions, unusual weather, and natural disasters, insect patterns, and other factors.

Demand for sugar is formed mostly by the food industry, but also by the ethanol production sector. Brazil is presently the largest producer of ethanol, which has recently enjoyed increased interest as a potential sustainable alternative to fossil fuels. For traders focusing on “green” markets, this can be a good area to pay attention to. Another simple way to predict market dynamics is to track food industry trends in large consumer countries around the world.

Sugar trading also offers attractive futures options. As sustainable fuels gain new ground and with growing demand for food worldwide, sugar trading promises steady growth and relative stability as part of a balanced portfolio.

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