Commodity ETF Spotlight: Time To Get Bullish On Sugar?

Includes: CANE, SGAR, SGG
by: Tom Lydon

Overall production and consumption of sugar has risen substantially on a global level since the 1990s. The growing demand from emerging markets has since led to the development of sugar exchange traded products, giving investors a way to access this area of the commodity market.

"As with all commodities, investors thinking about moving into the sugar market must get a grasp on the fundamentals of the industry. Despite its wide geographic spread, sugar production is concentrated in just a few countries. The leading producer is Brazil, which accounts for over 22% of global production, followed by India with 15%, Europe with 10% and China with 8%," Commodity HQ writes.

India and China are the world's largest consumers of sugar, however, production increases have been difficult to pace due to odd cyclical weather patterns, and unpredictable government policies in producer countries such as Brazil.

The commodity market has taken off this Summer, but some have outperformed more than others. Corn and soybeans have been on a run, while coffee and industrial metals have seen weakness, explains Eric Dutram for Zacks. Sugar started the Summer off with decent performance, but has since fallen into the "worst performing" category over the past 4 weeks.

By nature, sugar prices are unstable. Brazil is the world's largest sugar producer and weather conditions for production are favorable. Many analysts think that solid production will force traders to sell more contracts. Also, in India, sugar exports are fluid but the country could face a drought next growing season and if domestic demand picks up there will be a shortage in global supply.

For those investors that are feeling bullish on the sugar outlook, the iPath DJ AIG Sugar ETN (NYSEARCA:SGG) is the most popular exchange traded note that tracks sugar futures contracts.

iPath DJ AIG Sugar ETN

Other Sugar ETPs:

  • iPath Pure Beta Sugar ETN (NYSEARCA:SGAR)
  • Teucrium Sugar Fund (NYSEARCA:CANE)

Tisha Guerrero contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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