In the modern era of investment, commodities are an essential way for investors to expand their investment portfolio and not just stick to standard securities and real estate, etc. Usually, you can sort the commodities that we typically trade into four major categories, which are metals, energy, livestock and meat, and Agriculture.

Agriculture commodities include various crops and agricultural products. Still, in this article, we will discuss in detail what is an investment in sugar, how to invest in sugar, and also what sugar stocks are.

Sugar Industry

Whenever we talk about the sugar industry, we are usually referring to the production, processing, and marketing of sugars. Depending upon the climate conditions, you can extract the sugar from sugar cane, which makes up about 80% of the total sugar production, and sugar beet, which constitutes the remaining 20% of the global production of sugar.

Sugar Market

Whenever the discussion about sugar comes up, the first and most common use of sugar that comes to mind is in the food and beverages industry, as it serves as the most accomplished ingredient to add sweetness, improve flavor, and as an agent to improve the shelf life of the products but in reality, this is just one of the uses of sugar and its uses go beyond the kitchen. You can use it in the production of cosmetics and products related to medicines. Furthermore, you can use it in the industry, in the production of biofuels, Ethanol, and various other chemicals.

According to the United States Department of Agriculture, they anticipate that the global production of sugar will have a rise of 10.6 million tons, thanks to the production growth witnessed in Brazil and India. Though exports will be higher, it they anticipate that there will be a decrease in the stocks.

Sugar Trading

A broker is required to do sugar trading. Brokers' online portal allows access to different financial markets, which include the sugar market, and from that platform, sugar can be bought or sold to bag profits from the price swings.

Market Standards

Online sugar trading predominantly occurs through futures contracts, which are agreements specifying a predetermined price for a specific quantity of the commodity at a future date. The contract prices for sugar are established at a handful of key global exchanges, including the International Exchange (ICE), Kansai Commodities Exchange (KEX), the Brazilian Mercantile and Futures Exchange (BF&M), the National Commodities and Derivatives Exchange (NCDEX), National Commodities Exchange Limited (NCEL), Zhengzhou Commodity Exchange (CZCE), and the Multicommodity Exchange (MCX).

Top Sugar Producers

Below is a list of the top 5 leading producers of sugars for the year 2022/23. All values are 1,000 Metric Tons

Trading Hours

Usually, other commodities and instruments like securities, etc, are traded for straight days, but as sugar is traded at different exchanges, it is only traded from 8:30 to 17:59 GMT. The price change for sugar is only during March, May, July, October, and December.

Reasons to Invest In Sugar

A few of the most important reasons to invest in sugar and bag advantages.

Portfolio Diversification and Profit-Taking

It is a known fact that sugar is a volatile commodity and is influenced by various factors that are not limited to climate change. Still, it is also affected by market speculations and proves to be extremely beneficial for short-term traders.

It is said never to put all eggs in one basket; therefore, the addition of commodities to the portfolio is the most recommended solution for investors seeking solutions for portfolio diversification, which helps in mitigating the risk for the financial assets.

Renewable Energy and Bio Fuels

The utilization of sugars for the production of biofuels and renewable energy increases the demand for Ethanol, which is produced by sugar. This increase in demand provides an excellent opportunity to invest in sugar.

How to Invest in Sugar?

With respect to the goal, trading style, expertise, and budget, there are many ways one can invest in sugar. Here in this article, we have explained how you can invest in sugar depending on the aspects above.

Stocks

One of the common ways is to invest in the stocks that are engaged in the production of sugar, whether directly or indirectly. The price of the stock is usually related to the price of the sugar.

ETF (External Traded Funds)

Another way to invest in sugar is to invest in EFT. EFTs are a type of fund traded on the stock exchange and designed to cover the entire index. One can invest in the Agriculture index, which includes sugar.

Mutual Funds

These are similar to EFT, but with a slight difference; in mutual funds, the investor does not need to worry about investment management, i.e., buying and selling of the stocks. Professional fund managers manage these.

Futures

For investors who prefer short-term investment, the best available option is futures, where they can just speculate the price for some date in the future.

Factors Affecting Sugar Market

As with all other markets, the sugar market is also influenced by various factors that are briefly explained below.

Weather

As with all other agricultural commodities, weather conditions play a vital role in setting up the price for sugar. Suitable weather conditions help in producing a good crop and abundant supply, thus reducing the cost. In contrast, bad weather conditions can destroy the crop, and a demand and supply gap widens, which increases the price.

Ethanol demand

As previously mentioned, sugar is used in the production of Ethanol, so an increase in demand for Ethanol increases the price of sugar.

Currency Fluctuation

As with all other commodities, sugar is also priced in USD; therefore, any major shift in the USD price directly affects the price of sugar.

Health Concerns

As medical science has revealed the negative effects of sugar on the human body, more people are becoming concerned about the effects, and excessive intake has had an impact on the price of sugar.

Conclusion

Finally, investing in sugar is a good option for investors who are looking for portfolio diversification with an aim to minimize the risk factor as well as gain some profit. The best time to make investments in soft commodities such as sugar is when inflation is on the rise.