How to invest in sugar in 2023
This beginner friendly page explains what you need to know before investing in sugar. We explore its many uses, what moves its price, and offer a step-by-step guide on how to make your first sugar investment. Continue reading to learn more about this popular commodity.
Where can I invest in sugar online?
An online broker is the best place to start investing in sugar. To make things easier for you, our commodity experts have selected some of the top brokers around that let you invest in sugar. Simply click any of the links below to get started, or continue reading to learn more.
77% of retail CFD accounts lose money.
Why invest in sugar?
There are lots of reasons why you may want to invest in sugar. From speculating on ethanol prices, to diversifying your portfolio. However, the main reason many investors put their money into the sugar industry is to hedge against inflation. Below we’ve highlighted some of the top reasons why you may want to invest in sugar.
- Hedge against inflation. Inflation is something every investor has to contend with and one way to protect against it is by investing in soft commodities like sugar. Inflation is when money loses its value over time. Rising inflation rates generally tend to push the prices of commodities higher.
- Ethanol demand. Sugar can be used to produce ethanol. Ethanol has many uses ranging from fuel for transportation, to manufacturing products. Ethanol is often used as a substitute for fossil fuels and its demand has been increasing. One way to benefit from its growing demand is by investing in sugar.
- Diversify your portfolio. Adding commodities to your portfolio is a top way to spread your money across a range of different assets. Portfolio diversification can help protect your funds from underperforming industries. Sugar is used worldwide in many different ways, so including it in your investments is a good way to add diversification.
- Currency speculation. Like many agricultural commodities, sugar is priced in US Dollars. A strong or weak dollar can impact the price of sugar. A strong dollar results in a higher price for sugar and vice versa for a weak dollar. The world’s largest producer of sugar is Brazil, so the Brazilian Real can also be speculated on through investing in sugar.
5 top tips for investing in sugar
If you want to invest in sugar you can follow the steps below to get started.
- Decide on an investment strategy. Before you start you’ll want to decide on a strategy. You should consider if you plan on being an active or passive investor as that will determine how you invest. At this stage you may also want to decide how much risk you are willing to take on your sugar investments.
- Do your research. Researching the sugar industry will be the next step you could take. It is worthwhile taking the time to conduct well balanced research and deciding how you want to invest in sugar. Further down the page we have explained the many different ways you can invest in sugar.
- Set a budget. You may have already decided how much you are willing to risk and it’s wise to set a budget and stick to it. It goes without saying to never risk more than you can comfortably afford to lose.
- Choose between the long term and short term. Depending on your outlook for the future you may have a long or short term view on how sugar will perform. If you’re planning for the short term, it could be helpful to conduct technical analysis, while a longer term plan would benefit from fundamental analysis.
- Find an investment platform. FInally you’ll need to find a broker that lets you invest in sugar, as not all will offer it. Our commodity experts have found a selection of the best brokers who let you invest in sugar and if you click the blue button below you’ll be taken to our list.
Ways to invest in sugar
There are a number of different ways to invest in sugar and the right approach depends on things like your expertise and budget. Below we’ve briefly explained the ways in which you can invest in sugar.
Invest in sugar stocks
Buying stocks that are involved in the production of sugar is a way to invest in sugar, without directly investing in it. A sugar stock’s price will be correlated with the price of sugar although there are not many pure play sugar companies. You can also invest in other companies that are indirectly involved in sugar, such as plantation owners, machinery suppliers, and agribusiness that provide fertilisers and other necessary components.
Invest in sugar ETFs
One of the easiest ways to invest in sugar is to buy shares in an ETF. You can invest in ETFs that cover the wider agricultural sector which includes sugar. However, for direct exposure there are exchange traded funds that track the futures price of sugar, giving easier and cheaper access to sugar futures.
Invest in sugar mutual funds
Mutual funds are similar to ETFs. However they are managed funds, where a professional fund manager buys and sells shares in companies according to their expertise. There are lots of funds that focus specifically on the agricultural sector which can give exposure to sugar prices.
Invest in sugar futures
For short term investors or traders, sugar futures are the best option to speculate on its price. Futures are an agreement to make a trade in the future at a pre-agreed price. Although, futures trading is complex and requires some knowledge and an in-depth understanding of what affects the market. Futures are best suited to experienced investors.
How does the sugar market work?
Just like most other markets where supply and demand impact prices. If there is high demand then the price of sugar will rise, while if there is a surplus of supply, its price will fall. Many factors contribute to its supply and demand and below we’ve highlighted some of the most important ones.
- Weather. Sugar, like many other soft commodities, requires a certain amount of rainfall and sunshine to grow well. Extreme heat or too much rain can affect crop yields which in turn can impact its price. It’s particularly important to pay attention to the weather in Brazil, which is where most of the world’s sugar is grown.
- Ethanol price. As we’ve already mentioned, sugar’s uses stretch further than a food ingredient and it’s commonly used in the production of ethanol. If global demand for ethanol were to increase, more sugar would be required resulting in higher demand and higher prices.
- Currency prices. Sugar is priced in US dollars and the value of the dollar plays a great role in the price of sugar. If the dollar becomes strong against other currencies, sugar importers pay a higher price. If the dollar loses value against other currencies, the price of sugar drops, as importers pay less.
- Health concerns. Although health concerns do not impact the price of sugar on a day to day basis, they do play a role in its longer term outlook. Sugar is well regarded as a food ingredient that is detrimental to health. If in time, more of the world’s population lowers their intake of sugar, its demand will decrease along with its price.
When should you invest in sugar?
You can invest in sugar at any time, although one of the best times is when inflation rates are on the rise. Soft commodities such as sugar are often used as a hedge against inflation. If global inflation rates are creeping higher, investing in sugar could be a good way to protect against it.
In the previous section we highlighted a few factors that impact the price of sugar and keeping up to date with them could help you time your investment into it. For example, following weather changes in Brazil could provide an opportune time to invest in sugar, especially if adverse weather conditions are experienced.
Is sugar a good investment in 2023?
It could be a good time to invest in sugar this year. Ethanol demand has been increasing in recent years, especially in countries like China which is shifting towards biofuels. If demand for ethanol continues, demand for sugar will likely grow too. Inflation rates have also been edging higher, which bodes well for soft commodities.
What should I do now?
If you are ready to invest into the sugar market then registering with a broker that offers it would be a good idea. Click the blue button below to be taken to our page of expertly selected brokers. If you want to learn more about investing or trading, you can check out our free courses, where our experts help guide you through and improve your investing knowledge.
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