At one time, sugar was a luxury only the rich could afford. The widespread cultivation of sugar cane and sugar beets changed that and made sugar affordable to everyone. Over 70 percent of the world’s supply comes from sugar cane, and sugar beet production makes up the remaining 30 percent. Brazil and Indonesia are the largest producers of sugar cane, while the European Union and Ukraine are the leading sugar beet producers. You can invest in this sweet commodity in numerous ways, depending on your risk tolerance.
Trade sugar commodity futures contracts if you want to invest in the physical commodity. Sugar is listed on the Inter Continental Exchange, or ICE, under the symbol "SB." Sugar No. 11 is the benchmark for the world’s raw sugar trade and is known as “World Sugar.” One sugar contract controls 112,000 pounds, or 50 long tons, of sugar. Sugar’s price is quoted in U.S. currency. A move of 1/100 of a cent is worth $11.20 per contract.
Depositing an initial margin amount of $3,780 for each sugar contract you want to trade is required by all brokerage firms. The maintenance margin for each contract is $2,700. Sugar is a volatile commodity to trade and is known for experiencing unexpected price swings.
Trading sugar commodity futures options is a less risky way to take advantage of sugar’s price volatility. Each futures option controls one commodity futures contract. Call and put options give you the right, but not the obligation, to buy or sell the underlying futures contract at a set price before expiration. If you think the price of sugar will rise, you would buy a call option. If you think the price will fall, you would buy a put option. You don’t need to open a margin account to buy calls or puts. Your risk is limited to what you pay for the option.
Research some of the exchange-traded funds, or ETFs, that invest in the sugar industry. The Barclays iPath Dow Jones-UBS Sugar Total Return Sub-Index (NYSE: SGG) doesn’t hold the physical commodity. Instead, it tracks the price movements of the Dow Jones AIG Sugar Sub-Index. If you prefer investing in an ETF that trades sugar futures contracts, check out the iPath Pure Beta Sugar (NYSE: SGAR) and Teucrium Sugar Fund (NYSE: CANE). Both ETFs trade on the New York Stock Exchange and you can buy or sell shares through your online trading account.
- Use the information on the U.S. Department of Agriculture's website to get sugar crop production information and updates throughout the growing season.
- Sugar commodity futures trading is risky. Only trade with money you can afford to lose.
Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.