Commodity Trends: Short And Sweet

Includes: CANE, JJS, SGAR, SGG
by: Kris Rymer
  • Bearish trend developing for sugar prices
  • Sugar trending down from its all-time high of 36.08 cents per pound

Short and Sweet! No, no, I'm not talking about the article. I'm talking about sugar! Perhaps one of the best known commodities, sugar has an effect on many items we use, from food to ethanol. However, some of us are not aware that we can gain exposure in our portfolios to sugar prices through exchange-traded funds (ETFs) and futures contracts.

On February 2, 2011, the March 2011 futures contract for sugar reached an all-time high of 36.08 cents per pound. The all-time low for sugar came on April 28, 1999, at 4.46 cents per pound. Today, sugar futures are trading at about 23.10 cents per pound, well off its all-time high now.

While there are many fundamentals that influence prices for sugar, our firm does not attempt to analyze this information in order to predict future price action. Rather, our firm reacts to the markets. Regarding sugar, we see the potential for a significant medium- to long-term down trend developing.

To profit from exposure to sugar prices outside of the futures markets, there are several ETFs available:

  • SGG Dow Jones-UBS Subindex Sugar Total Return ETN
  • JJS Dow Jones-UBS Subindex Softs Total Return ETN
  • SGAR Pure Beta Sugar ETN
  • CANE Sugar Fund

Each of the funds listed above provides full exposure to sugar prices with the exception of JJS, which provides about 35% exposure to sugar in its portfolio. The remaining holdings in this fund include the other "soft" commodities: coffee (32%) and cotton (33%).

If you would like to gain exposure to sugar prices through the futures market, the most liquid contracts to trade are on the InterContinental Exchange (NYSE:ICE) under the symbol SB.

Disclosure: I do not hold any stock, ETF or ETN positions in any securities listed above, and I do not intend to do so in the next 72 hours. However, I do hold positions in Sugar futures contracts.

Note about using ETFs and ETNs: These investment vehicles do not necessarily have 100% correlation with the underlying commodity or its futures contract. Furthermore, it is important to understand the structure of ETNs as they have certain additional risks.