The CME contract trades globally on the CME Globex electronic trading platform and has expiration months of March, May, July and October. In 2020, the country produced more than 40% of the world’s total–amounting to 1.87 billion tonnes. When sugarcane was produced in the country almost 500 years ago, it was equated with the value of gold. Consuming too much sugar has negative health effects–forcing governing bodies to increase taxes and restrictions against the products being implemented. For example, in 2018, the UK government implemented a levy on soft drink producers for using more than recommended sugar proportions.
Sugar consumption is linked to serious illnesses like obesity, diabetes, and heart disease. In developed countries, people are becoming conscious of eating too much sugar which leads to a decrease in sugar consumption. Sugar futures are the most common way to trade in the market although they are not the only options. The trading asset will depend upon whether you want to own the underlying asset. A process of trial and error and an in-depth analysis can maximize profits. We have outlined a basic step-by-step guide to start your sugar trading journey.
How To Start Trading Sugar
75% of retail client accounts lose money when trading CFDs, with this investment provider. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. The advantage of CFDs is that traders can have exposure to sugar prices without having to purchase shares, ETFs, futures or options.
An options bet succeeds only if the price of sugar #11 futures rises above the strike price by an amount greater than the premium paid for the contract. Investing in or trading financial instruments, commodities, or other assets carries a high degree of risk. You should only in trading or investing if you are fully aware of the potential risk of loosing all your deposited money. More than 90% of gasoline in the US contains ethanol which affects sugar prices. When oil prices are elevated, some refiners use ethanol in their gasoline blends to save money.
The information in this site does not contain investment advice or an investment recommendation, or an offer of or solicitation for transaction in any financial instrument. Shawn Hackett, President of Hackett Financial Advisors, believes that demand for sugar is strong and that the futures market suggests a rally might be coming soon. Commodities such as sugar have historically had low correlations with stocks, bonds and other financial assets. Trading in sugar provides a way to diversify a portfolio and smooth out trading returns.
When you’re trading a futures contract via CFDs, like Sugar No.11, you’ll need to decide on the quantity of the commodity to buy or sell in advance of the expiry. Global consumption of sugar has shown signs of waning in recent years due to a variety of reasons, public health among them. Governments in developed countries have been actively trying to change consumer behaviour when it comes to sugar. Is quoted in USD, which means there is normally an inverse relationship between the dollar and the price of sugar. When the US dollar is weak, it costs less to buy sugar in other global currencies, and a larger amount when USD is high.
Trading Sugar with AvaTrade
Trading sugar is a feasible choice for investors because of its size and volatile nature. Whether the market is rising or falling, there is an opportunity to profit through sugar futures. Exchange-traded notes track an underlying index of securities and trade on the stock exchange like shares. Note that ETNs have lower index tracking errors and higher liquidity risk. The size of the contracts varies depending on the type of sugar variable. The size of one contract of raw sugar represents 112,000 lbs of raw cane sugar and they are quoted in USX per cent.
Therefore, options traders must be right about the size and timing of the move in sugar futures to profit from their trades. Options are also a derivative instrument that employ leverage to trade in commodities. However, options also have a strike price, which is the price above which the option finishes in the money. Between 74-89% of retail investor accounts lose money when trading CFDs. This quarterly report includes data on U.S. and global trade, production, consumption and stocks, as well as analysis of developments affecting world trade… PublicFinanceInternational.org helps traders and investors, from around the world, navigate the complex world of online brokers.
Raw sugar futures traded at 24.5 cents per pound in April, hovering near their highest in 11 years amid expectations of weaker supply due to adverse weather conditions. As the Asian cane crushing season has started to wind down, key producing countries, including India, Thailand, China, and Pakistan, have downwardly revised crop projections. Sugar output in India is estimated to drop to 33.5 MT in the current marketing year from previous forecasts of 34.5 MT amid unseasonal rainfalls. At the same time, sugar production in Europe slid on lower beet crops derived from reduced acreage and severe summer drought. The output is set to rise in Brazil, but the higher sugar cane supply would likely be allocated to ethanol. The prices of crude oil have increased in the last few weeks, and the end of gasoline tax exemptions in Brazil will make biofuel blending a lot more profitable.
The demand for ethanol is on the increase, which could mean higher sugar prices in future. Sugar is a commodity once reserved for the wealthy, but today it is one of the most commonly-traded assets worldwide. Here we look at what moves the price of sugar and discuss popular sugar trading strategies. Options buyers pay a price known as a premium to purchase contracts.
Therefore, it’s necessary to ensure rollover arrangements are in place. You can trade sugar using a wide range of financial instruments, including futures, CFDs. Sugar can be used to produce ethanol – a chemical compound that can be used as an alternative to fossil fuel.
Consequently, an increase in demand for ethanol leads to an increase in sugar prices. Since the sugar market is extremely diverse, there are various opportunities for investors to diversify their portfolios or secure selling and purchase prices. Traders get the opportunity to get exposed to the full contract value by only depositing a small margin. The advantage of CFDs for traders is that they can have exposure to sugar prices without having to purchase shares, futures, or ETFs. You will need a brokerage – the online storefront where you purchase commodities, stocks, futures, exchange-traded funds , and other investments. There are numerous sugar trading options such as sugar futures, CFDs, sugar options, shares and ETFs that have their assets and liabilities.
Ethanol production
Sugar Options are another derivative element that employs leverage to trade in commodities. CFDs are a great alternative to sugar futures if you’re starting out with sugar trading. A futures contract is an agreement between two parties to buy or sell a fixed amount of a commodity at a predetermined price on a fixed date. Futures contracts allow traders flexibility in assuming the price of a commodity without having to take ownership of the commodity itself. Therefore, poor conditions such as drought, frost and insufficient rainfall can reduce its supply. If demand for sugar outweighs the supply, it can lead to a run on sugar and push the price up.
One way to trade in sugar is through the use of a contract for difference derivative instrument. The value of a CFD is the difference between the price of the shares at the time of purchase and the current price. Since a large sugar production occurs in these countries, events in these countries can greatly affect the commodity’s price.
Trading any financial instrument involves a significant risk of loss. Commodity.com is not liable for any damages arising out of the use of its contents. When evaluating online brokers, always consult the broker’s website. Commodity.com makes no warranty that its content will be accurate, timely, useful, or reliable. Mike Ciccarelli, a commodity and stock trader at Briefing.com agrees. He believes that small changes in weather patterns could be the catalyst for a supply disruption and a rise in prices.