Learn about Sugar Commodity Trading, Follow Sugar Commodity Markets
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.
As part of our sugar commodity trading analysis, let's see where sugar comes from, in what forms and at the new dynamic that promises to make a profound change to future world sugar commodity markets. Sugar is produced in over 100 countries worldwide, with between 75-80% made from sugarcane, mainly in tropical and sub-tropical areas in the southern hemisphere. A key factor in successful crop yields is rainfall, with an annual minimum of around 600 mm. Apart from adverse weather conditions, another factor that can cause sugar prices on world commodity exchanges to rise is crop infestation by pests.
The top producing nations are Brazil, which is also the largest exporter in the world, India, China, the EU, USA and Australia. One key factor which distorts world sugar markets is the subsidy regime in the US and Europe, which supports producers by giving them prices higher than the world price. Sugar is used in a range of fruit and vegetable formulations, in bread fermentation, and increasingly as source material for ethanol fuel.
Moving on from 2007 when there was already very little room between supply and demand, the situation will almost certainly deteriorate with an expected demand surge in emerging BRIC nations particularly China and India. In fact India as the largest consumer in the world is now using significantly more sugar for ethanol as an alternative fuel. Meanwhile, starting from a very low base of 7kg annual per capita consumption is China, and as the world's third largest consumer and producer, is still some way behind the annual USA per capita demand of 45kg.
You will help your sugar commodity trading strategy by getting to know about the Brazilian market, the largest world producer. This country's strategy is to avoid a sugar glut by taking any surplus sugarcane crop to produce ethanol for biodiesel for export and domestic consumption. More sugar is being channelled for ethanol as crude oil prices rise, along with sugar demand surges in China. There are major challenges for sugar producers going forward, given the likely high crude oil prices in future coupled with growing demand, seeing sugar prices remaining high.
With your chosen commodity trading system and advice from your professional financial adviser, you can trade from almost anywhere in the world with good internet access. #11 Raw sugar futures is the most heavily traded sugar futures contract in the world, available on the ICE US Futures platform as is the #16 Sugar futures contract. Alternatively, you can trade raw sugar futures on LIFFE CONNECT, the trading platform of LIFFE, part of the NYSE Euronext Group. Also look at soft commodity indexes using an ETF which may not involve taking a leveraged position. With the growth in bio ethanol demand and sugar consumption in the BRIC economies, prospects for sugar prices and sugar commodity trading look very exciting in the years ahead. - 23305
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.
As part of our sugar commodity trading analysis, let's see where sugar comes from, in what forms and at the new dynamic that promises to make a profound change to future world sugar commodity markets. Sugar is produced in over 100 countries worldwide, with between 75-80% made from sugarcane, mainly in tropical and sub-tropical areas in the southern hemisphere. A key factor in successful crop yields is rainfall, with an annual minimum of around 600 mm. Apart from adverse weather conditions, another factor that can cause sugar prices on world commodity exchanges to rise is crop infestation by pests.
The top producing nations are Brazil, which is also the largest exporter in the world, India, China, the EU, USA and Australia. One key factor which distorts world sugar markets is the subsidy regime in the US and Europe, which supports producers by giving them prices higher than the world price. Sugar is used in a range of fruit and vegetable formulations, in bread fermentation, and increasingly as source material for ethanol fuel.
Moving on from 2007 when there was already very little room between supply and demand, the situation will almost certainly deteriorate with an expected demand surge in emerging BRIC nations particularly China and India. In fact India as the largest consumer in the world is now using significantly more sugar for ethanol as an alternative fuel. Meanwhile, starting from a very low base of 7kg annual per capita consumption is China, and as the world's third largest consumer and producer, is still some way behind the annual USA per capita demand of 45kg.
You will help your sugar commodity trading strategy by getting to know about the Brazilian market, the largest world producer. This country's strategy is to avoid a sugar glut by taking any surplus sugarcane crop to produce ethanol for biodiesel for export and domestic consumption. More sugar is being channelled for ethanol as crude oil prices rise, along with sugar demand surges in China. There are major challenges for sugar producers going forward, given the likely high crude oil prices in future coupled with growing demand, seeing sugar prices remaining high.
With your chosen commodity trading system and advice from your professional financial adviser, you can trade from almost anywhere in the world with good internet access. #11 Raw sugar futures is the most heavily traded sugar futures contract in the world, available on the ICE US Futures platform as is the #16 Sugar futures contract. Alternatively, you can trade raw sugar futures on LIFFE CONNECT, the trading platform of LIFFE, part of the NYSE Euronext Group. Also look at soft commodity indexes using an ETF which may not involve taking a leveraged position. With the growth in bio ethanol demand and sugar consumption in the BRIC economies, prospects for sugar prices and sugar commodity trading look very exciting in the years ahead. - 23305
About the Author:
Researching soft commodities, the author, Marianna Gomes, writes articles for the Commodity Trading Today website, a practical online resource. Find out more about how you could benefit from sugar commodity trading tips here.
posted by Mr. Forex at
5:07 AM
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