Play The Sugar Rush With These ETF’s (SGG, DBA, RJA)
Where does sugar go next? Analysts differ widely. Some optimists share the view of Michael Coleman, a manager of commodities hedge funds, who argues sugar could climb another 80% to top 40 cents/lb. “Sugar is caught in a perfect storm,” he told Bloomberg TV. “From this point on, it depends on how price affects demand.”
But according to Peter Baron, executive director of the International Sugar Organization, 40 cents/lb is “wishful thinking,” since higher prices will decelerate import buying. “People are much more cautious when they face prices which are in the clouds,” he said, adding that exorbitant prices would compel food producers to use alternatives, like corn syrups.
Indeed, a good number of traders are now eyeing the market with caution. “The markets are technically overbought,” Nick Penney, a London-based trader, told Bloomberg last week, “but this is not dissuading new buyers from entering it.”
Playing The Sugar Rush
“Still, if you want in on the sugar rush, you have plenty of options available to you. The purest play is, of course, sugar futures, which are available on ICE in 112,000 pound contracts. The No. 11 contract trades global raw sugar, while the No. 16 contract trades the U.S. market. Also, if food makers do switch over to corn-based sweeteners based on higher prices, it might be worth it to keep an eye on corn as well. Corn futures are sold on the CBOT, in contract sizes of 5,000 bushels,” Lara Crigger Reports From Hard Assets Investor.
“Investors seeking an exchange-traded play on sugar can check out the futures-based iPath Dow Jones AIG Sugar Total Return Sub-Index ETN (SGG). Year-to-date, SGG is up 62%, and lately has been one of the better performers in our Breakfast Index,” Crigger Reports.
“Other sugar-related (although more broadly based) exchange-traded vehicles include the PowerShares DB Agriculture Fund (DBA), which tracks futures in corn, soybeans, wheat and sugar; and the ELEMENTS Rogers International Commodity Agriculture ETN (RJA), which tracks 20 futures contracts worldwide,” Crigger Reports.
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