Differences between Investing vs Trading
Differences between Investing vs Trading
Global researchers believe the market for sugar could be worth almost $53 billion by the end of 2022. Sugar is a highly versatile soft commodity, so find out all there is to know about trading the price of sugar.As with most soft commodities, the price of sugar is influenced by the forces of supply and demand. If more people want to buy sugar than sell it, the value will rise. If more people want to sell sugar than buy it, its value will fall.
The leading sugar producers worldwide include Brazil, India and the European Union (EU). Brazil is said to produce around 39 million tonnes as the market leader. There are several factors that determine the value of sugar in the commodities markets. The strength of the US dollar is one such element, given that sugar is priced in USD. A weak USD sees soft commodity values fall and if the USD is strong against other fiat currencies sugar becomes more expensive and in greater demand.
Inclement weather conditions can also wreak havoc with sugar crops, which can cause supply issues. Attitudes towards sugar consumption are also changing in many developed countries, with links to diabetes and obesity potentially leading to a fall in demand and reduced sugar prices.
The all-time high for the price of sugar was recorded in 1974 when sugar reached $0.60 per pound. This surge in the value of sugar was attributed to substantial purchases from the Soviet Union and multiple Arab regions. It then plunged to just $0.03 per pound in 1983.
Since then, the price of sugar has been on a steady, upward trajectory. Following the turn of the millennium, the price rocketed from $0.05 per pound in early 2000 to highs of $0.33 per pound in 2011. One of the primary reasons behind the rise of sugar in the commodities markets has been the boom of ethanol creation in Brazil, the world’s leading sugar producer. Ethanol is a chemical compound that can be used as an energy alternative to fossil fuels.
Futures contracts are usually used to trade sugar. These contracts state a date and price at which you are obliged to buy the underlying commodity. Futures contracts for sugar are usually traded via the Intercontinental Exchange (ICE).
Instead of owning the underlying asset of sugar, you may wish to invest in equities that produce and distribute sugar or sugar-based products. There are also popular exchange-traded funds (ETFs) focused on soft commodities like sugar.
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* The spreads provided are a reflection of the time-weighted average. Though Skilling attempts to provide competitive spreads during all trading hours, clients should note that these may vary and are susceptible to underlying market conditions. The above is provided for indicative purposes only. Clients are advised to check important news announcements on our Economic Calendar, which may result in the widening of spreads, amongst other instances.
The above spreads are applicable under normal trading conditions. Skilling has the right to amend the above spreads according to market conditions as per the 'Terms and Conditions'.
What affects Sugar prices?
In the past, major events have had a notable impact on global sugar prices.
For example, in 2016, increased demand from India caused by a drought in Brazil resulted in an upwards shift in sugar futures. The same year, Hurricane Matthew disrupted the production and supply of sugar cane in the Caribbean region, resulting in higher prices. In 2018, the US-China trade war had an effect on sugar prices too – Chinese import tariffs led to decreased demand and a fall in global sugar prices. It is clear that traders need to be aware of any significant events or changes in policy which may have an impact on the price of sugar. By monitoring such developments and taking appropriate action, traders could profit from changes in the world market.
How to trade Sugar CFD
Sugar CFDs are a great way to take advantage of price movements in the sugar market. As with any other trading instrument, you need to be aware of the risks involved in taking positions – but done correctly, sugar contracts could offer potentially profitable opportunities. Here's how to get started:
1. Select your broker and check the spreads.
2. Research and study the fundamentals of the sugar market. Learn about seasonal trends which can affect the prices.
3. Choose your trading strategy and make sure you understand the risks of each approach
4. Place an order. Make sure you use a sensible risk-reward ratio and understand the implications of leverage before entering into a position.
5. Manage your position - Keep an eye on the markets and make adjustments as needed. When you’re ready to close out your position, make sure you fully understand the fees and costs associated with doing so.
Sugar CFDs can offer the opportunity for potentially lucrative returns, but it is important to remember that trading carries risk. Make sure you do your research before getting started and always use sensible position sizes in order to manage your risk. Good luck!
What are the other options for trading Sugar?
If you're looking for an alternative to trading physical sugar, there are a few options worth considering. You can trade sugar-related stocks or contracts for difference (CFD). Trading in stocks gives you exposure to the underlying asset, while CFDs allow traders to speculate on the price movements of existing markets without owning the underlying asset.
Both have different advantages and disadvantages that should be considered when selecting the right product for you. As with any trading, it's important to do your own research, understand the risks involved and make sure you're comfortable before entering a trade. Remember, no matter what type of sugar trading you choose, always use appropriate risk management strategies to protect your capital.
Why Trade [[data.name]]
Make the most of price fluctuations - no matter what direction the price swings and without the restrictions that come with owning the underlying asset.