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Sugar made up of carbon, hydrogen and oxygen, is the common name for a sweet short-chained carbohydrate. These carbohydrates can be found in many different food types as simple variations in their molecular structure produces various monosaccharides such as glucose and disaccharides such as sucrose, extending both the use and purpose of it. There are also chemically different substances which may be of the same sweetness, although these are not classified as sugars. Some of these are used as low calorie substitutes for sugar, being described as artificial sweeteners.
Brown sugars are granulated sugars that contain residual molasses or have grains purposely coated by the molasses producing a light or dark colour. These tend to be used in baking goods, confectionary and toffees. Granulated sugars tend to be used at the table, to be sprinkled on foods and to sweeten various drinks hot or cold. It is also used for adding sweetness in home baking and adds texture to other cooked products. They are also used as preservatives to avoid micro-organisms from growing and fresh food from ruining, such as candied fruits, jams and marmalades. In 2011, there was a world production of around 168 million tonnes worth of sugar. The average person consumes around 24kg of sugar a year which is roughly equivalent to 260 food calories per person, a day.
There are several ways for you to invest in sugar. One way is through the purchase or sale of sugar future contracts. All the sugar future contracts are standardised allowing for hedgers and traders to ease their minds about the amount of the fundamental commodity. The need for this contract only becomes evident when you begin to consider that almost every country grows its own sugar. One of the most common sugar contracts is the Sugar No.11. This contract is for the physical delivery of raw sugar cane. It includes shipping costs to the buyer’s ship at a port within the country whom is selling the sugar, a type of shipping known as free on board. The sugar No.11 contract months tend to be March, May, July and October with a contract size for raw sugar around $112,000. The minimum price move is around $11.20 per contract. Sugar futures contracts can be found and purchased via opening up a brokerage account with a broker that deals with futures.
There is also the option for investors to purchase an option on sugar futures such as standard equity options. There are two main benefits to buying these types of investments, with one being that you limiting your chances of a loss as you cannot lose more than what you may have paid excluding brokerage costs. So if you were to be wrong on the movement on the price value then you would only lose what you already paid in. The second benefit to buying this investment is that the options tend to be less expensive than buying the futures contract outright. Options also provide new investors with some level of protection.
The other way to profit from a move in sugar is by purchasing stocks. Imperial Sugar Company and Alexander&Baldwin (NYSE:ALEX) are two of the most important names to be aware of when it comes to buying sugar stocks. Apart from these distinct stocks and commodities, there are ETFs and ETNs that allow you to add sugar into your portfolios.
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