Sugar prices are pushing to new highs, opening up pathways to get sugar exposure in order to stave off the effects of inflation.
According to the Wall Street Journal, sugar prices have not been this high in over 10 years. In particular, many factors are swaying in favor of bullish sugar investors as market experts tout that a “commodities super cycle” is underway.
“Sugar prices have shot to their highest level in more than a decade, boosted by disappointing harvests in some of the world’s largest producers and strong demand in China,” the Wall Street Journal report said.
Given the price movements, traders have been quick to pounce on the opportunity.
“Prices for raw cane-sugar futures traded in New York, the international benchmark, have jumped this year,” the WSJ report added. “In recent sessions they traded above 24 cents a pound, reaching the highest since March 2012.”
Additionally, the forces of supply and demand are skewing towards upside in sugar prices. More specifically, supply is low thanks to regional weather conditions in sugar-producing countries.
“Meanwhile, stockpiles in Brazil are low, due to a late harvesting start caused by a significantly rainy season,” Markets Insider reported. “And supplies are also lagging in Europe, Pakistan, Thailand, China and Mexico.”
Get Exposure to Sugar's Upside
The narrative of using agricultural commodities to hedge against inflation hasn’t changed yet, especially given that rising consumer prices are proving to be more stubborn than anticipated. That said, as sugar continues to see more upside, it can provide an ideal inflation hedge.
Investors looking to get sugar exposure can do so via exchange traded funds (ETFs) that give dynamic exposure to commodities like sugar without having to open futures positions. In particular, investors can look at the Teucrium Sugar ETF (CANE ) — the only sugar ETF on the market.
The fund seeks to have the daily changes in the NAV of the fund’s shares reflect the daily changes in the sugar market for future delivery as measured by a weighted average of the closing settlement prices for three futures contracts for No. 11 Sugar that are traded on the ICE Futures US. The fund seeks to achieve its investment objective by investing under normal market conditions in Benchmark Component Futures Contracts.
For more news, information, and analysis, visit the Commodities Channel.