Trading Sugar as a commodity

Sugar, commodityHistorically, sugar has always been one of the most important and sought-after soft commodities on the international trading markets. Its ubiquity in consumable products, its ease of storage and transport, and the high demand it enjoys have all contributed to a legacy of consistent returns on sugar investments stretching back many hundreds of years.

Prior to mechanisation, the cultivation of sugar was labour intensive and transportation was difficult. Until the 17th century – when cane sugar began to be sourced from the New World colonies – European prices for standard granulated sugar were so high that it was often called “white gold”.

Although contemporary technology and agricultural efficiencies have allowed prices of sugar to drop considerably today, it is still an important export product for several economies including Brazil, Thailand and Australia.

Along with cocoa, coffee, cotton and similar produce, sugar is classed as a soft commodity. Soft commodities are consumable agricultural and textile products from tropical regions. Many industry insiders believe that this is a commodity class that has been left significantly undervalued, making sugar an attractive investment opportunity to today’s investor.

There are also macro-economic indicators which suggest a long-term rise in sugar prices. In the United States and Canada, sugar cane costs almost twice as much to produce when compared to the sugar industries of Brazil and Thailand: primarily due to labour costs. As these emerging economies are expected to make gains against the US dollar in the near future, so too will the relative values of their sugar exports, and prices may approach parity with their North American competitors.

Sugar is also susceptible to moderate market volatility due to its relatively low unit value, and the political instability of some of the major global exporters. These factors all influence the price of sugar as a commodity, and provide the investor with a number of tactical options when considering the potential of this market.

Read more about some of the other most commonly traded commodities.