The Trading Culture and Traditions in Sugar Producing Companies

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Sugar traded to one of the lowest in September 2018 at 9.83 cents per pound, since the great recession. It was not below 10 cents before August 2018 but abundant supplies and weaker currencies of sugar producing country like Brazil led to bearish storm for the futures. The commodity was at highest level in October 2016 and Brazil and US are the key producer of ethanol made from sugarcane in Brazil and corn in the US. In May 2019, the futures were at 11.80 levels. A strong dollar and weak Real resulted in bearish trends but the growth in population will increase demand where he supplies are limited. In 2018-2019, India moved to the top status is world’s largest sugar producer overtaking Brazil, where two-third of the harvests will be used to produce ethanol. The US China trade dispute made farmers to grow other crops to meet the Chinese demands. In May 2019, China further announced to add a new round of tarrifs on wheat, chicken, sugar and other agricultural products that resulted in growth in future trade where July sugar contract was up in New York.

Chemically, sugar can be found in many different food types of molecular structures that produce various monosaccharides such as glucose and disaccharides such as sucrose where some of these are used as low calorie substitutes for sugar, being described as artificial sweeteners. Brown sugars are granulated as it contains residual molasses and are used in baking goods, confectionary and toffees.

Investment can be made in sale or purchase of sugar future contracts. All the sugar future contracts are standardised allowing hedgers and traders. The contract Sugar No.11 is used for the physical delivery of raw sugar cane. It includes shipping costs to the buyer’s ship at a port within the country. It is traded in March, May, July and October with a contract size for raw sugar around $112,000. The minimum price move is around $11.20 per contract. There are some options for investors to purchase in sugar futures such as standard equity options. There are two main benefits to buying it – it limits the chance of a loss and it is less expensive than buying the futures contract outright. Options also provide new investors with some level of protection. Purchasing stocks of sugar producing companies like Imperial Sugar Company and Alexander&Baldwin (NYSE: ALEX), and ETFs and ETNs allows to add sugar into your portfolios.

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