How to buy, sell and invest in sugar

Learn about how to invest in sugar, and the factors that drive prices

Produced in the Indian subcontinent since ancient times, sugar is harvested from two main sources: sugarcane and sugar beets. More than 130 countries in the world produce sugar and over 70% of sugar produced is consumed in its country of origin. While most of us are happy enough eating sugar in sweets, baked treats and chocolate, some people choose to invest in it. Find out the ways to invest in sugar and the varying levels of risk.

Invest in sugar futures

Futures are a legal agreement to buy or sell something, at a predetermined price, at a specified time in the future. The contracts are negotiated at futures exchanges, which act as a marketplace between buyers and sellers.

There are various exchanges that offer contracts on sugar including The New York Mercantile Exchange (NYMEX), which is part of the Chicago Mercantile Exchange (CME), and the Intercontinental Exchange (ICE).

A benchmark in the raw sugar trade, and the most common sugar contract, is Sugar No. 11. A futures contract for the physical delivery of raw cane sugar. Futures contracts are standardised, meaning one Sugar No.11 contract always represents 112,000 pounds of raw centrifugal cane sugar based on 96 degrees average polarisation.

Futures can be extremely volatile and are riskier than other investment options. You have to be right on the timing and price movement.

Pros
  • All futures contracts are standardised, eliminating concerns about the quality and quantity of the underlying commodity.
Cons
  • Futures can be extremely volatile and are riskier than other investment options. You have to be right on the timing and price movement.
  • Futures expire on a certain date. If you fail to exercise them prior to expiry they become worthless.

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Invest in sugar options on futures

An options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a later date at an agreed upon price.

There are two main benefits to options. Firstly, you are limiting your loss. You cannot lose more than you paid for the option, excluding brokerage costs. So, if you are wrong on the move of the price of sugar, your loss is only what you paid for the option. Secondly, options are usually far less expensive than buying the futures contract outright.

The International Exchange (ICE) offers an options contract on sugar futures.

Pros
  • Less risky than sugar futures.
  • Usually much cheaper than futures.
Cons
  • Options on futures have expiration dates.

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Invest in sugar ETFs

ETFs are another option worth considering. ETFs trade as shares on exchanges the same way that stocks do. They give access to a whole load of assets, without having to put all of your money into one or two firms. If you need to brush up on ETFs, check out our guide.

ETFs allow investors to minimise risk, while taking advantage of the performance and general popularity of a particular sector.

There are three popular ETFs that invest in Sugar No. 11 futures: iPath Dow jones-USB Sugar Total Return Sub-Index ETN, Teucrium Sugar Fund and iPath Pure Beta Sugar ETN.

Pros
  • ETFs allow portfolio diversification and risk management.
  • Lower costs than open-end mutual funds.
Cons
  • By placing your money in an ETF, you are trusting your portfolio to a robo—adviser meaning you relinquish some control over the split of assets.

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Invest in sugar company shares

When it comes to sugar stocks and shares, there are two names to keep in mind: Imperial Sugar Company and Alexander & Baldwin (NYSE:ALEX)

Pros
  • You can pick and choose a range of stocks and cash out when you want.
  • A simple, accessible and versatile way to access the market.
Cons
  • Can mean putting all your eggs in one basket.

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How much is sugar worth

What are the factors driving the price of sugar?

Sugar is a volatile commodity, meaning investing could come with substantial gains or losses. This is largely due to the number of factors that impact the price of sugar. These include:

  • Global supply and demand: If farmers expect higher demand they will plant more crops and when weaker demand is expected, they will plant fewer crops. If global demand exceeds or falls short of sugar supplies, prices are affected accordingly.
  • The Brazilian Real: Fluctuations in brazil’s currency can majorly impact sugar prices. When the real is weak, Brazilian farmers produce more sugar for export to countries with strong currencies and greater purchasing power. When the real is strong, Brazilian farmers are more likely to sell in the local market. A weak real means greater supply on global markets and lower prices.
  • Government Subsidies: Government subsidies and tariffs are used to protect local sugar producers. These distort the market, creating artificially high supply and depressing prices.
  • The Weather: Poor weather conditions can affect crops and reduce supply.
  • Health concerns: Health risks have left governments under pressure to take action against high obesity rates. This could mean sugar taxes or restrictions, leading to a decline in consumption and a fall in prices.
  • Ethanol Demand: Sugar can be used to make ethanol, ethanol competes with gasoline as a fuel source. Thus, a fall in oil prices could depress sugar demand for ethanol while an increase in oil prices would mean higher demand for sugar.

Compare these providers for access to sugar ETFs and more

Table: sorted by promoted deals first
Name Product Price per trade Frequent trader rate Platform fees Brand description
eToro Free Stocks
£0
N/A
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Capital at risk. 0% commission but other fees may apply. The minimum deposit with eToro is $200.
Hargreaves Lansdown Fund and Share Account
£11.95
£5.95
£0
Hargreaves Lansdown is the UK's number one platform for private investors, with the depth of features you'd expect from an established platform. The minimum deposit with HL is £1. Capital at risk.
Freetrade
Finder Award
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N/A
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Claim your free share worth between £3 and £200. Capital at risk.
Degiro Share Dealing
UK: £1.75 + 0.014% (max £5)
US: €0.50 + $0.004 per share
N/A
£0
Degiro is widely seen as one of the best low-cost share brokers, for people who are looking to trade regularly. The minimum deposit with Degiro is £0. Capital at risk.
interactive investor Trading Account
£7.99 (with one free trade per month)
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£9.99 per month
Interactive Investor offers everything most investors need. Its flat fees makes it pricey for small portfolios, but cheap for big ones. The minimum deposit with ii is £0. Capital at risk.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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2 Responses

    Default Gravatar
    KarimeJuly 8, 2019

    How to put a buyer and seller together and still get paid? The product is sugar in the metric tons. Thank you!

      Avatarfinder Customer Care
      JoshuaJuly 9, 2019Staff

      Hi Karime,

      Thanks for getting in touch with Finder. I hope all is well with you. 😃

      There are different ways for you to help buyers and sellers find each other and get paid for it. You might need a platform. It could be a website or a physical establishment. Providing your services to both buyers and sellers could help you make a profit. By making it easier for both parties to make business, they might be willing to pay you for your service.

      You might need to do your independent research Karime to learn the specific steps on how you can further improve your business idea.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!

      Cheers,
      Joshua

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