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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
About the Author:
The author, Marianna Gomes, pens articles on agricultural commodities to the Commodity Trading Today website, a helpful informational resource. Learn more about how you could gain from sugar commodity trading here. You can get a unique content version of this article from the Uber Article Directory.
RSS Feed (xml)
No comments:
Post a Comment