Sugar Sits Near The Middle Of Its Trading Range

December 14th, 2018


Category: Sugar

(Seeking Alpha) – Sugar can be one of the most volatile agricultural commodities that trade on the futures exchange. Since 1971, sugar futures have traded from a low at 2.29 to a high of 66 cents per pound. The sweet commodity has a habit of doubling and halving in value as it can move from the bottom to the top of its pricing cycle as it pivots from glut to a deficit.

Sugar is a complicated commodity when it comes to fundamental supply and demand analysis. Governments around the world, including the U.S. and Europe, subsidize domestic production of beet and cane sugar. Subsidies and tariffs create price distortions in commodities markets and can result in conditions of oversupply in some parts of the world and shortages in others. In an example of just how dramatic subsidies in the U.S. sugar market are these days, the price of U.S. sugar futures number 16 that trade on the ICE futures exchange was at the the 25.25 cents per pound level on December 13. The price of subsidized sugar was twice the price of world sugar futures number 11 that also trade on the ICE and were at the 12.64 cents per pound level on December 13. Subsidies and tariffs interfere with fundamentals in all commodities markets. When it comes to sugar, the free market price is most sensitive to the ever-changing supply and demand equation for the sweet commodity

The price of free-market world sugar or sugar number 11 had been extremely volatile as it appears to have found a bottom in September. The most direct route for a trade or investment in the sugar market is via the futures that trade on the Intercontinental Exchange. For those who do not venture into the leveraged and volatile world of future, the iPath B Bloomberg Sugar Total Return ETN product (SGG) and the Teucrium Sugar ETF (CANE) provide alternatives for those wishing to participate in the volatile world of the sweet commodity. Sugar is now sitting near the middle of its trading range after a period of heightened price variance.

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