A beginner’s guide to sugar: Price, uses & market overview

Explore a thorough overview of the sugar market, learn how it works in simple terms and get to grips with its significance as a popular global commodity.
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Updated: Nov 30, 2023
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On this page, we explore everything you need to know about sugar. Gain insights into sugar market trends, pricing mechanisms, and the environmental impact of sugar. 

Read on to learn more about this popular commodity and find links to beginner friendly guides explaining how you can get involved in sugar. 

What is sugar?

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Sugar is a sweet-tasting carbohydrate used around the world in food and drinks. However, Sugar is used for more than just sweetening food. From ethanol production to livestock feed, sugar is one of the most versatile commodities with annual global trade exceeding $40 billion. 

Sugar first emerged around the Indian Ocean where sugarcane farming was widespread. Innovations in beet sugar processing opened new markets in Europe, ultimately spreading across the world. Today, Brazil, India, and the European Union lead sugar production with consumption increasing yearly.  

Sugarcane’s climate tolerance helps the commodity counter weather impacts on supply, but health concerns have capped demand in some markets as sugar gets supplemented by substitutes. 

Sugar market overview

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The London Sugar Exchange emerged in the 19th century allowing buyers, sellers, and brokers to hedge against sugar’s price volatility. Over time, additional exchanges opened in New York and around the world to establish benchmark pricing. 

Sugar is harvested around the world and over 180 million tonnes are traded annually. Mostly raw sugar between low-cost producers like Brazil, India, and Thailand. Despite health concerns, sugar consumption around the world keeps rising at around 2% annually. Seasonal harvesting constraints, increasing extreme weather, and energy policy shifts have many experts suggesting sugar will continue trading, albeit with more volatility. 

Is sugar valuable? 

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Yes, sugar is a valuable commodity and there are numerous reasons why investors are attracted to the market. We have highlighted some of these key fundamentals below, explaining what they are and why they matter.

  • 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. 

How to invest in sugar

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You can invest in sugar by using a commodity trading platform. These platforms offer a range of commodities and are very easy to use. There are different platforms suitable for specific requirements. 

Some let you buy sugar, others let you trade sugar, and many are designed for investing in the grain. Visit our dedicated guide to discover how to invest in sugar.

Sugar in your investment portfolio

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A diverse investment portfolio can help protect you during market uncertainty, and the inclusion of sugar can add value while allowing you to spread your money across various markets. 

Sugar often moves independently to traditional investments like stocks and bonds. You can include sugar in your portfolio as a hedge against potential losses. During times of economic uncertainty, investors view commodity grains such as sugar as attractive options. 

Sugar’s long history and the fact it is a food staple for over half the world, makes it a good long term play.

Sugar vs other commodities

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Sugar is part of the agricultural family of commodities, including wheat, corn, and barley. Each commodity is unique in its own way and offers different features for investors and traders. You can learn more about specific commodities using our dedicated guides below. 

  • Wheat. Wheat is a grain that is grown around the world and is used for various foods. 
  • Corn. Corn is one of the most versatile commodities with many uses, including livestock feed, biofuel, oil, and food. 
  • Barley. Barley is a cereal grain used in beer, animal fodder, and some health foods. 
  • Soybean. Soybean is a major global commodity used for livestock feed and cooking oil.

FAQs

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Prash Raval
Financial Writer
Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.