Analysis of the price of sugar on the New York Stock Exchange

Elements that can influence the price of this asset:

Analysis N°1

Firstly, you should of course monitor movements in the American dollar rate on the foreign exchange market. It is important to remember that the price of sugar is quoted in American dollars and therefore the value of this currency will influence demand for this commodity from other countries that use other currencies and wish to benefit from an advantageous currency exchange rate. Variations in the Brazilian currency, the Real, should also be followed closely given that this country is the primary producer of sugar worldwide.

Analysis N°2

Another factor to follow when completing this analysis concerns public finances as certain prices are implemented with the objective of protecting the producers by sometimes encouraging them to produce more sugar than is necessary for the market. Therefore, subventions could exert an influence on supply and demand and therefore indirectly impact the price of this commodity.

Analysis N°3

We would also monitor climate change and meteorological events that could impact the harvest. It should in fact be remembered that the production of sugar is highly sensitive to climate and requires a lot of sun and rain. Unfavourable meteorological conditions could therefore negatively impact this production.

Analysis N°4

In the same way, health worries relating to sugar and its negative effects on health could also influence the market. Health recommendations relating to high sugar consumption could seriously impact the long term demand for this commodity.

Analysis N°5

Finally, another factor to monitor closely is the demand for ethanol as sugar is also used in the production of this alternative form of energy.

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General presentation of sugar as a stock market asset:

Firstly we shall take a few moments to examine sugar and its market in a little more detail. In fact, sugar is one of the food commodities that is the most highly traded on the stock markets worldwide and its market represents nearly 52 billion dollars at present.

Sugar as a food is actually produced in two different ways, from sugar cane or sugar beet. Regarding the demand for sugar, it is also important to know that sugar is in fact far more used in industry than simply as a sweetener for other foods. Sugar is also used in beauty products for example and as an alternative energy to fossil fuels such as oil.

It is exactly this significant polyvalence of sugar that makes it such a highly appreciated asset for investors and also explains the high liquidity of this market. In fact, the sugar market is a large market and so the volatility is also very high.

Of course, this volatility also calls for prudence as it could be said to be synonymous with risk.

It can also be beneficial to be aware of sugar production around the world. In fact, this is produced mainly in certain particular countries and now we shall briefly summarise these high sugar producing countries as well as the comparative amounts they produce:

Brazil is clearly the current leader in sugar production worldwide producing an average of 39 million tons per year.
We then find India with 24.8 million tons per year.
The European Union lies in third position and produces an average of 15.5 million tons of sugar per year.
In fourth position we find China with 10 million tons.
Finally, Thailand is in fifth position with 9.26 million tons of sugar produced per year.

It should be noted that sugar, like other agricultural or food commodities, is quoted on the American NYMEX stock market. Its quotation is therefore in American dollars.

How to achieve a good technical analysis of the sugar price?

The first analysis that we shall examine here is the technical analysis of the sugar price. This in fact consists of studying the stock market charts of this asset in order to identify the significant rising and falling movements.

For this we use several different types of technical indicators such as the moving averages, the MACD indicator, the pivot points, and the support and resistance technical indicators as well as the Bollinger Bands.

These indicators can be displayed directly on the charts available from online brokers but of course rely on your correct interpretation of the data which requires a certain prior knowledge. Their objective is to provide an indication as to the direction of the trend as well as its strength, the volatility of the market and also the major psychological thresholds which can lead to a reversal or acceleration in the trend.

Frequently Asked Questions

How has the global consumption of sugar grown over time?

The global consumption of sugar is currently around 170 million tons per year and this figure grows by around 2% every year. This rise can be explained by the demographic growth, the increase in revenue per person in various countries and the development and changes in modern eating habits. Over the last ten years the global consumption of sugar has therefore risen by around 30 million tons per year.

Where and how to invest in the price of sugar?

There are various ways to invest in sugar on the stock markets. The more basic is of course to simply speculate on the price of this agricultural commodity using specific tools or derived investment products. It is also possible to invest in sugar by taking position on the price or buying shares directly on the stock market of companies in this activity sector which are quoted on the stock markets.

Which analyses are required for studying the price of sugar?

Among the necessary analyses to implement for studying the price of sugar and its movements we particularly note the technical analysis as well as the fundamental analysis. In fact, the technical analysis enables you to learn the strength of a trend as well as the volatility of a market whereas a fundamental analysis is based on the study of the events and exterior factors that could influence the supply and demand for sugar.