Ah, Sugar. There is truly nothing sweeter, except the profits from its trade. People have been benefiting from the sweet substance in a multitude of ways for thousands of years with no sign of it changing.
Global production of sugar is staggering through just the cultivation of sugarcane alone. Other plants tissues provide sugar as well, like the sugar beet plant. Sugarcane is a tall grass appearing much like corn. It accounts for 70% of the global 120 tons annually produced. The remaining 30% is from sugar beet plants.
Sugar is used in foods ranging from plain table sugar to cakes. It is also used as a preservative and as a moisture retaining ingredient in certain prepared foods. And then there is the wonderful use of it in more typical ways such as candies and chocolates.
Sugar is crucial to the alcoholic beverage industry for aid in fermentation, to the textile industry for sizing and to the pharmaceutical industry as well. It has even been used in the production of biofuels.
History of Trading
As long ago as 8,000BC, people have traded it. There is evidence that New Guinea is where the sugar trade has its roots. It was not long after this period of time that Asia began to cultivate and trade sugar as well.
Today, modern technology has sped up the processing and increased the amount of sugar produced worldwide significantly. One hundred twenty-one countries participate in the trade annually today. Unfortunately, about half of all production stems from two countries, Brazil and India, leading to volatility.
Benefits of Trading Sugar
When considering sugar as a commodity to bet on, it would be wise to recognize its price volatility. For this reason, it makes an excellent speculative instrument for an individual looking to take advantage of a short term supply issue due to changes in weather in the few countries growing the cane.
It is also an excellent hedge against the weak dollar and inflation. When the dollar is weak, prices of sugar remain high. Of course it is always good as, yet another, vehicle to use in portfolio diversification.
Disadvantages To Trading Sugar
Limited to just a handful of countries, sugar prices tend to be volatile. When supply is limited, it is limited to the conditions relative to those producing countries. If the political or the environmental factors are averse, sugar can be a bit of a gamble.
There are also global issues like the obesity epidemic. The reputation of sugar most certainly takes a hit when this issue is considered. The sugar substitute industry can drive the demand down, leaving weak prices.
How to Begin Trading
If you are interested in trading sugar futures, it would be wise to get to know the markets as well as become educated on the agricultural issues surrounding the commodity.
There are several sites online for beginner traders that can help to facilitate your trading. Of course it never hurts to consult a professional for advice and get involved with a local group of investors. Being knowledgeable and prepared may be the best investment of all.