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.
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.
Key producing nations are led by Brazil, also the largest global exporter, then India, China, the EU, USA and Australia. Subsidy regimes in Europe and the US are a major distorting factor in world sugar markets, as they artificially support producers giving them prices higher than the world sugar price. As well as established uses in fruit and vegetable products and in bread fermentation, 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.
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. - 23314
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.
Key producing nations are led by Brazil, also the largest global exporter, then India, China, the EU, USA and Australia. Subsidy regimes in Europe and the US are a major distorting factor in world sugar markets, as they artificially support producers giving them prices higher than the world sugar price. As well as established uses in fruit and vegetable products and in bread fermentation, 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.
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. - 23314
About the Author:
Covering soft commodities, the author, Marianna Gomes, pens articles for the Commodity Trading Today website, a helpful online resource. Find out more about how you could profit from sugar commodity trading tips here.
posted by Mr. Forex at
5:08 AM
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