Sugar prices have risen exponentially this year and could translate into higher candy prices come Halloween. Thanks to a confluence of factors, the term “sugarflation” has become a thing.
In particular, inclement weather has been a primary catalyst for lower supply, namely the emergence of El Niño. As such, global suppliers such as Asia and Brazil are unable to meet demand. Drought and other harsh weather conditions aren’t conducive to growth.
Nidhi Jain, an associate specialist at The Smart Cube, a research firm said, “The intensity of the dry season that El Niño is set to influence this year could result in a 10%–15% reduction in sugarcane yield globally."
As such, this could flow over into higher candy prices on October 31. Consumers continue to feel the pinch on sugar-related food items.
“Your sweet tooth may have to pay a pretty penny to be satisfied,” said Lisa Thompson, a savings expert for the Shopmium cashback app, in an Axios report.
Major food companies are also dealing with soaring sugar prices. This might help with the bottom line, but is it sustainable in the long term?
“Major sweets and snack makers Hershey and Mondelez, which produce brands including Reese’s Peanut Butter Cups and Sour Patch Kids, are also dealing with high sugar prices, contributing to rising costs, executives said during company earnings calls in April,” a Wall Street Journal article noted.
Trading the Higher Trend
Traders who want to capitalize on rising sugar prices don’t have to resort to futures exposure. Another option for easy ingress is the Teucrium Sugar ETF (CANE ) — the only sugar ETF on the market.
It seeks to have the daily changes in the NAV of shares reflect those in the sugar market for future delivery. A weighted average of the closing settlement prices for three futures contracts for No. 11 Sugar, traded on the ICE Futures US, measures this. 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.
