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.
There are several ways to invest in sugar, but it’s not as easy as purchasing company shares and could involve quite complex investment types. Find out the ways to invest in sugar and the varying levels of risk.
It’s possible to invest in sugar, but there aren’t many publicly traded sugar manufacturing companies that you can invest in, so the main ways to invest would be in either companies that manufacture with sugar, sugar ETFs or in more complex investment types, such as options and futures contracts.
One company that produces sugar is British Sugar, which is a subsidiary of Associated British Foods. It is the sole purchaser of all sugar beet grown in Britain. It is also a supplier of cannabis to GW Pharmaceuticals.
Tate & Lyle started out as a sugar refining business, but is now a food and beverage company. It creates ingredients using raw materials, such as corn and tapioca. It also produces sweeteners, including Splenda sucralose fructose and allulose; as well as gum and dietary fibres.
We all love a sweet treat – so it’s easy to choose companies whose products you personally enjoy, as well as based on detailed research into their financials.
Some companies include Mondelez and Nestle, both of which own well-known confectionary brands.
Mondelez is an American confectionary company. It owns Belvita, Oreo, Ritz, Milka, Toblerone, Cadbury and Green & Black’s, among many other billion-dollar companies. Sugar is a main ingredient in a lot of the products Mondelez creates. It’s taken steps in recent years to reduce the amount of sugar used in its products to limit the amount of calories consumed by customers.
Nestle is a food and drink company that owns popular confectionary companies Smarties, KitKat, Rolo and Aero, among others. Nestle sources its sugarcane and sugar beet from more than 200 suppliers and 60 countries around the world. It is aiming to improve its sugar supply chain, and states that 98% of its sugar was assessed as deforestation-free in 2021.
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 is 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.
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.
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.
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:
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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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