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.
Serious sugar shortages across Asia are leading to long queues of consumers desperate for sugar in Pakistan and India, for example. In 2007 India was a net exporter of sugar by five million tons but by 2009 the country is a net importer. A range of factors have led to world sugar demand far outstripping supply. Following the global slowdown there are now hopes of strong recovery and together with a collapse in the US dollar against other major currencies, real asset prices are being driven higher. If you then factor in a weak monsoon in India and atrocious weather in Brazil which has affected sugar yields, the result is raw sugar prices surging towards a high of 25 cents a pound.
Firstly, as you embark on your sugar commodity trading journey, discover where sugar comes from, and see how a recent development in alternative fuels poses a challenge to global sugar commodity markets in future. With sugar produced in over 100 countries, largely from the tropical and sub-tropical areas of the southern hemisphere, around 75-80% comes from sugarcane. A key factor for successful crop yields is plentiful rainfall, and the annual optimum is around 600 mm. Sugar prices on world commodity exchanges can also be driven higher by crop infestation as a result of attacks by pests.
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.
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.
Armed with your chosen commodity trading system and good advice from your professional financial adviser, you can trade from almost anywhere in the world with good internet access. The #11 Raw sugar futures on the ICE US Futures platform is the most heavily traded sugar futures contract globally, followed by the #16 Sugar futures contract. It is also possible to use LIFFE CONNECT, part of the NYSE Euronext Group, to trade raw sugar futures. For those hesitant about leveraging in futures, an alternative could be to look at a soft commodity index using an ETF. Broadly speaking, higher sugar prices suggests sugar commodity trading looks very exciting going forward, given growing sugar consumption in the BRIC economies and rising demand for bio ethanol. - 23162
Serious sugar shortages across Asia are leading to long queues of consumers desperate for sugar in Pakistan and India, for example. In 2007 India was a net exporter of sugar by five million tons but by 2009 the country is a net importer. A range of factors have led to world sugar demand far outstripping supply. Following the global slowdown there are now hopes of strong recovery and together with a collapse in the US dollar against other major currencies, real asset prices are being driven higher. If you then factor in a weak monsoon in India and atrocious weather in Brazil which has affected sugar yields, the result is raw sugar prices surging towards a high of 25 cents a pound.
Firstly, as you embark on your sugar commodity trading journey, discover where sugar comes from, and see how a recent development in alternative fuels poses a challenge to global sugar commodity markets in future. With sugar produced in over 100 countries, largely from the tropical and sub-tropical areas of the southern hemisphere, around 75-80% comes from sugarcane. A key factor for successful crop yields is plentiful rainfall, and the annual optimum is around 600 mm. Sugar prices on world commodity exchanges can also be driven higher by crop infestation as a result of attacks by pests.
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.
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.
Armed with your chosen commodity trading system and good advice from your professional financial adviser, you can trade from almost anywhere in the world with good internet access. The #11 Raw sugar futures on the ICE US Futures platform is the most heavily traded sugar futures contract globally, followed by the #16 Sugar futures contract. It is also possible to use LIFFE CONNECT, part of the NYSE Euronext Group, to trade raw sugar futures. For those hesitant about leveraging in futures, an alternative could be to look at a soft commodity index using an ETF. Broadly speaking, higher sugar prices suggests sugar commodity trading looks very exciting going forward, given growing sugar consumption in the BRIC economies and rising demand for bio ethanol. - 23162
About the Author:
Focusing on soft commodities, the author, Marianna Gomes, contributes articles to the Commodity Trading Today website, a helpful informational resource. Learn more about how you could benefit from sugar commodity trading ideas here.
posted by X - Men @ 5:47 AM
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