Sugar ETN Is Looking Sweet

A sugar ETN may prove to be really sweet, as global futures prices for the commodity have risen so sharply that some food manufacturers have issued warnings.

The world is facing sugar shortage so alarming that the Agriculture Department has been asked to ease quotas on imports. Since the price of sugar has gone up substantially, manufacturers are warning that run-up could impact grocery shelves, reports Jerry Hrisch for The LA Times.

Analysts say those fears are overblown and that it’s just a tactic on the part of manufacturers to get the United States to take down trading barriers.

On world markets, sugar prices are up 72% for the last six months. Among the pressures on the supply of sugar include bad weather in the sugar producing region of India, the Brazilian sugar cane diversion to make ethanol and the rise of the global sweet tooth.

If the prices are reflected on grocery shelves, it may not be for awhile. Many large food manufacturers likely bought sugar futures after prices began to climb.

• iPath Dow Jones AIG Sugar ETN (SGG): up 63.4% year-to-date

Comments

[leveraged:]

Could you please explain how this sugar etn works?

Aug 18 08:04 AM

[kiwi101:]

This sounds like the same type of so-called "shortage" that we saw with rice a while back. Please, give me a break!

Aug 18 09:17 AM

[Mad Hedge F...:]

xcvn. I have been watching with some amusement the price action in world sugar, which has exploded from 16 cents/pound to 22 cents since June, because the world’s largest consumer, India, flipped from being an exporter to an importer. Besides demolishing the budgets this year for the big sugar users here, the chocolate, soft drink, and cereal companies, (and McDonald’s), the sugar spike is a wakeup call for everyone else in the commodity space. When sugar last peaked at 63 cents during the seventies, the Club of Rome was in vogue, and discussion of resource shortages and imminent global starvation was rife. That is over $1.50/pound on an inflation adjusted basis today. When global supply/demand get’s out of kilter for something everyone has to have, the sky is the limit on prices. Instead of the normal 10%, 20%, and 30% moves traders expect, they will be served up with gyrations of 10X, 20X, and 30X. I expect all commodities to have major moves up in the decade ahead. Sugar was just the first in line.

Aug 18 12:11 PM

[Stephen Fra...:]

hmm, i remember people saying the same thing when oil was at $150/barrel last summer


On Aug 18 12:11 PM Mad Hedge Fund Trader wrote:

> xcvn. I have been watching with some amusement the price action in
> world sugar, which has exploded from 16 cents/pound to 22 cents since
> June, because the world’s largest consumer, India, flipped from being
> an exporter to an importer. Besides demolishing the budgets this
> year for the big sugar users here, the chocolate, soft drink, and
> cereal companies, (and McDonald’s), the sugar spike is a wakeup call
> for everyone else in the commodity space. When sugar last peaked
> at 63 cents during the seventies, the Club of Rome was in vogue,
> and discussion of resource shortages and imminent global starvation
> was rife. That is over $1.50/pound on an inflation adjusted basis
> today. When global supply/demand get’s out of kilter for something
> everyone has to have, the sky is the limit on prices. Instead of
> the normal 10%, 20%, and 30% moves traders expect, they will be served
> up with gyrations of 10X, 20X, and 30X. I expect all commodities
> to have major moves up in the decade ahead. Sugar was just the first
> in line.

Aug 18 10:57 PM