Compare Brokers For Trading Sugar

Looking for brokers for trading sugar? We have compared 14 broker accounts (out of 147) that are suitable for you below.

We found 14 broker accounts (out of 147) that are suitable for Sugar.

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Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.

The Ultimate Guide to

Popular Commodities For Traders: Sugar

What is Sugar?

Sugar is a naturally occurring carbohydrate found in many types of plants. It is produced during the photosynthesis process, when absorbed light reacts with carbon dioxide. There are various forms of sugar, including monosaccharides, such as fructose and glucose. When these two types of simple sugars are combined, they produce the disaccharide sugar, sucrose, which is refined to produce the granulated ‘table’ sugar that most consumers are familiar with.

Most of the world’s commercial sugar is produced from the sucrose in sugar beets or sugar cane, due to the extremely high concentrations found in these plants.

In addition to being used in food products, sugar is used in the production of ethanol, which gives it a role as an energy commodity in addition to being a food commodity.

History of Sugar

As it is in most plants, sugar, in some form, will have been growing in the wild about a hundred million years ago and it is widely thought that it would have been in India and south-east Asia. It can be said with confidence that people in these areas were eating sugar cane around 2500BC.

Sugar became an expensive commodity when it was found that the juice of the sugar cane plants could be used in preparing food, and made into granulated crystals making it easy to store and export. This process was thought to have occurred by the time of the Imperial Guptas, around the 5th-century CE.

Sugar was regarded as a luxury, but from the 17th century onwards, its popularity began to grow, and by the 19th century it was deemed a necessity and part of everyday life. It became so popular it began to have huge social and economic impacts on the world. Colonisation of the tropical islands and the emergence of the slave trade were as a result of the sugar industry.

Modern Day Statistics For Sugar

Production of sugar in 2016/2017 was around 178 million metric tons, a more than 10 million metric ton increase from the previous year (statisa).

Top Ten Producers of Sugar (2014-2016)

1. Brazil

2. India

3. EU

4. China

5. Thailand

6. United States

7. Mexico

8. Pakistan

9. Australia

10. Russia

What Influences The Sugar Market

The price of sugar is mainly influenced by supply and demand. Some of the factors that affect this include:

  • The health concerns of consumption such as tooth decay, diabetes, and obesity. Modern nations have made it a priority to solve these problems, which could potentially result in less sugar being produced.

  • The weather. Sugar cane demands a tropical climate, whereas beets require a cooler climate. Frost damage or lack of rain can ruin the processing capacity, playing a significant role in its availability.

  • As sugar cane is useful for ethanol distillation, the world’s fuel industry also has an impact on its price. For example, Brazil, who are major sugar producers, are also promoting the use of ethanol fueled vehicles, increasing its demand.

  • The price of sugar has shown to be correlated with inflation, and can, therefore, be used to hedge against inflation in a well-rounded portfolio.

How is Sugar Traded?

Sugar is usually traded freely in what is considered a competitive marketplace. Futures and options are amongst the most popular instruments for this exchange-traded commodity. The sugar futures trading history dates back to 1914, when they were traded on the Sugar and Cocoa Exchange.

The Sugar No. 11 futures contract traded on today’s Intercontinental Exchange (ICE) is one of the major benchmarks for the sugar trading industry. It trades under the symbol SB, with a contract size of 112,000 pounds, during the months of March, May, July and October, and is quoted in cents and hundredths of a cent per pound, with a minimum price movement at the equivalent of $11.20 per contract.

Futures contracts are also traded on exchanges around the world, including the Kansai Commodities Exchange (KEX), the Brazilian Mercantile and Futures Exchange (BF&M), the National Commodities and Derivatives Exchange (NCDEX), Zhengzou Commodity Exchange (CZCE), and the National Commodity Exchange Limited (NCEL).

Futures and options are mainly used by producers and manufacturers within the industry that rely on sugar. In order to hedge their risks with regards to the price of sugar, they place trades which provide them with some protection against price rises or decreases, depending on their requirements.

In addition to futures and options, traders can also speculate on the industry using Exchange-traded funds (ETFs) and exchange traded notes (ETNs), such as those traded on the London Stock Exchange. The Dow Jones AIG Sugar Total Return Sub-Index is an ETN that tracks the performance of the sugar.

Another convenient way to trade sugar is through contracts for difference (CFDs). Regulated online brokers provide easy access to such products through their online trading platforms. One example is the CFD from regulated brokers, IG, which is based on the price of the London Sugar No. 5 futures contract which is traded on the London International Financial Futures and Options Exchange (LIFFE). The minimum requirements for a trade are 1 contract, with the value of one pip being USD 50, and a minimum margin requirement of 4%. At the current buy price of 382.0, $764 would be required to place the trade (382.0 * 1 * 50 * 4%).

IG - Sugar CFD

IG – Sugar CFD

Conclusion

Sugar prices have fallen continually in 2017 due to a world producing surplus. Factors such as this and the afore mentioned, mean that understanding the market can be difficult as price swings are not uncommon. Traders wishing to speculate on the price of the industry using CFDs should seek a regulated broker to place the trades to ensure they are protected by the stringent regulations they are required to abide by.

Related Pages

Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.