Sugar ETFs Sweet As Government Mulls Bailout

Includes: CANE, SGAR, SGG
by: Tom Lydon

After a year of lower prices, sugar exchange traded funds could finally see some support as the U.S. government considers taking a large chunk of sugar off the market.

The U.S. Department of Agriculture is thinking about purchasing 400,000 tons of sugar to support defaulting U.S. sugar processors, reports Alexandra Wexler for the Wall Street Journal. A final decision will be made as early as April 1.

The move would bolster profits for companies that turn sugar beets and sugar cane into granulated sweetener, but this would also translate to higher retail food prices.

"Clearly, the USDA has made up its mind that Big Sugar is going to trump the American consumer," Pierson Bob Clair, president and chief executive at Brown & Haley, said in the article.

Barbara Fecso, an economist at the USDA, expects that the USDA could go ahead with the new buying program unless domestic prices rebound.

A bumper crop year for sugar beets in the upper Midwest and sugar cane has pressured U.S. sugar prices.

Sugar related exchange traded products include:

  • iPath Dow Jones-AIG Sugar Total Return Sub-Index ETN (NYSEARCA:SGG): down 22.6% over the past year
  • iPath Pure Beta Sugar (NYSEARCA:SGAR): down 24.8% over the past year
  • Teucrium Sugar Fund (NYSEARCA:CANE): down 26.9% over the past year

Max Chen 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.