Updated on September 10, 2024
Caramels, brownies, cookies… Who doesn’t like sweets? At the same time, none of the sweets is complete without one ingredient. No sugar, of course. And even though sugar is certainly very well known to everyone, not everyone is informed that sugar can be traded. And you can make quite a bit of money doing it. Sugar is one of the most popular assets. A really large number of brokers allow you to invest in it. So let’s take a closer look at how you can make money trading this sweet commodity.
Sugar – properties and uses
It is probably not necessary to describe sugar at length. We have all certainly met him at home in the kitchen. These are white sweet crystals that are used for sweetening. Be it tea, coffee, cakes or other sweets. We can know sugar in the form of already white crystals, flour, or perhaps in the form of cubes. All these versions will be waiting for you today on the shelf of the nearest store. However, before the sugar gets there, it has a long and difficult journey ahead of it.
With a bit of exaggeration, we could say that our sugar grows in the fields. Sucrose, as sugar is professionally called in the chemical industry, is contained in a number of plants. However, it has the most significant share in two crops. They are sugar cane and sugar beet. Well, these crops are grown for sugar production.
Currently, the production of sugar from sugar cane dominates. Approximately 70% of the total production of this commodity is obtained from it. The production of sugar itself is quite demanding. Both in terms of time and engineering. Special stands are needed for this. This is precisely why the development of engineering contributed to the production of sugar.
And when we talked about the fact that sugar has to travel a really long way before it reaches our store shelves, we meant it literally. The largest exporter of this commodity is now Brazil. It produces approximately 25 million tons of sugar annually. Other large producers are India, China, the USA and Thailand.
However, sugar is also at home in the Czech Republic. We also have well-known sugar factories here. For example, Tereos TTD based in Dobrovica. The greatest development of the sugar industry was in the Czech lands, especially in the 19th and 20th centuries. However, production was only in the order of hundreds of thousands of tons of sugar. So we cannot compete with the biggest manufacturers.
History of sugar
And where does sugar production actually begin? Probably no one will find out today. What is certain, however, is that sugar cane, from which sugar has been produced since ancient times, originates in India. From India, this crop then spread further to the Arabian Peninsula and Africa. And although according to legend it is India that came up with the production of sugar, the Arabs appropriate this process to their own culture. The truth remains that they are the ones who founded the very first sugar factory. And that in Crete around the year 1000.
Sugar also became popular in Europe. However, it was not a commonly available commodity as it is today. In the beginning, it was available only to the rich. And that’s why it was called white gold. In the 15th century, Venice, Italy, became the cent of this important commodity. This situation changed along with the travels of Christopher Columbus. He took sugar cane with him and planted it in the Caribbean region. This area turned out to be very favorable for the cultivation of this crop. And that also boosted its production.
The spread of sugar among common people was also supported by the invention of a new sugar crop. That is, sugar beets. It only happened in the 18th century. At that time, sugar became so popular that it became one of the three most popular commodities for trading. Right next to rum and slaves.
How to trade sugar
Now let’s look at the main thing that this text wants to tell us. That is, how you can close deals with sugar. There are several options for investing in this commodity. The first of these is the commodity exchange. On that you will find sugar as a physical commodity. So the parties of sugar producers and those who want to physically have sugar meet here.
Physical sugar is usually traded through futures contracts. These are futures contracts, where both parties undertake to exchange a predetermined amount of sugar for a predetermined price. And that on a predetermined date. These contracts are beneficial for both parties. He will guarantee them a price of this commodity that will suit both of them.
CFD assets
However, for small traders who only want to make money trading sugar, there is no need to have sugar in physical form. If you are one of these traders, then CFD trading could be a good solution for you. With this method of trading, you are not buying a real asset. This means that there is no need to deal with transport or storage of sugar. And is it worth it or not?
The way it works is that the sugar v only plays the role of the underlying asset in this case. And you speculate on its future price development. So if you find in your market research that the price of sugar is expected to rise, you enter a buy position. If, on the other hand, the messenger of your estimates should fall, then you will enter a selling position. However, you are not actually buying any real sugar.
Whether you win or lose on your trade then depends on whether your guess was correct. If so, the broker is obliged to pay you the difference between the purchase and sale price of the asset. However, if you made a mistake in your estimate, you must pay the difference in price to the broker. And that’s how you lose.
Beware of risks
However, in addition to the advantages of CFD assets, such as the possibility to earn even on a drop in the price level, there are also risks that must be taken into account. Among the biggest is the lever. The joke is that when you want to close the trade and you want to trade with more assets than you are able to invest, the broker will lend you the remaining amount. But at that moment you have to count on the fact that you are closing a trade with financial leverage.
It is a mechanism that will multiply your final earnings the moment you exit the trade. But also a gap. In this way, you can actually earn and lose several times more than you put into the trade. And by what number is this final profit or loss multiplied? This depends on how much margin you entered the trade with.
Another way to close sugar shops is to buy shares of companies that produce sugar. Again, you can close trades with stocks as such or only CFD stocks. If you buy a real share, you will become a shareholder of the company. And in addition to a possible right to a dividend payment, you also get the right to vote at general meetings. You can thus indirectly influence the future development of the given company.
How to begin
So you already know how you can trade sugar. But where to start? Don’t worry, it’s not a big deal. You just need to find a good online broker on the web that will allow you to close sugar deals. And since sugar is one of the most popular assets, you will find a lot of them. But choose carefully. Not every broker will offer you the same conditions for trading. And you will even find fraudsters among them. So we advise you to read the reviews well. And that, among other things, also the reviews of traders.
And when you find a good broker, be sure to prepare well for trading. Have a well studied market. So that you know in which direction the price of sugar will go in the near future. You can choose, for example, technical or fundamental analysis . A great advantage that most brokers offer today is a free demo account. You can try trading on it first. And, in addition, to familiarize yourself with the trading platform offered by the broker.
What affects the price of sugar
As you study the market, you should take into account several factors that can affect the future price of sugar. The first one is the weather. The crops from which sugar is produced need suitable conditions for cultivation. When there is too much drought or, on the contrary, humidity, the harvest may not be successful. As a result, there will be less sugar and an increase in the value of this commodity can be assumed.
Another of these factors is also seasonality. That is, the time before the harvest when sugar cane and sugar beet stocks are getting thinner. And thus their price increases. And the time after the harvest, when, on the other hand, the warehouses are full. The political and economic situation in the world can also affect the value of this commodity. For example, the imposition of tariffs and restrictions on exports.
Sugar – current online chart
See how the price of sugar evolves over time.
Development of interest in the commodity
As you can see on the graph, the curve of the development of the value of sugar is similar over the years. It is precisely because of the already mentioned seasonality.
Sugar – Summary
Sugar is one of the most popular commodities to trade. You can also invest in it. Now you already know how. But whether you choose CFD assets or share trading, do not forget to analyze the market well beforehand. It is up to you whether technical or fundamental analysis is better for you. However, it is good to leave nothing to chance when investing.
