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?
Before investing in sugar, 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.
How to invest in sugar?
Sugar is an important commodity that is used in many food and beverage products. As an investment, sugar can offer portfolio diversification, as well as attractive return potential. There are several ways to invest in sugar, each with its own advantages and disadvantages, and the choice of one or other of these methods will depend primarily on your level of risk aversion.
Firstly, investors can invest in sugar futures. Futures contracts are agreements to buy or sell a specified quantity of sugar at a pre-agreed price at a future date. Sugar futures are traded on commodity exchanges such as the NYMEX and ICE. Futures contracts can offer potentially high returns, but they also carry a high risk due to price volatility.
Another option is to invest in sugar trackers or ETFs. These funds allow investors to invest in sugar without having to trade directly in the commodity markets. Trackers and ETFs invest in sugar futures or in companies involved in the sugar industry. They can offer diversified exposure to sugar, which can be an advantage for investors seeking to minimise risk.
Investors can also invest in shares of companies involved in the production or distribution of sugar. Shares in sugar companies are traded on stock markets and can offer potentially higher returns than trackers or ETFs. However, individual shares are riskier than diversified funds, as they can be affected by company-specific factors.
Finally, investors can invest in sugar CFDs. CFDs are financial instruments that allow investors to speculate on sugar price movements without having to physically buy or sell sugar. Sugar CFDs are traded on online trading platforms and offer great flexibility, as investors can take up or down positions. However, CFDs also carry high risks due to the leverage that can magnify gains, but also losses.