Want a sweet investment? Think sugar, say Saijel Kishan and Claudia Carpenter on Bloomberg.com. Not only was sugar the best-performing commodity last year (it rose 60%), but it could “beat bonds, stocks and oil for a second year”.
Indeed, “sugar could quadruple from here and it would still be below its all-time high”, says James Rogers, founder of Diapason Commodities Management. He doesn’t think the rally has even started yet.
The fundamentals certainly seem to be encouraging. Demand is high and supply is tight. Brazil, the world’s largest sugar producer, now devotes more than half of its crop to ethanol production. Other producers are struggling to turn out as much as is needed. In Australia, Cyclone Larry damaged the sugar-cane fields, sending the sugar futures contract up on the New York market. Mauritius – the world’s seventh-biggest sugar producer – saw production fall nearly 10% last year. The sugar price “spiked to a 20-year high in January”, notes Lex in the FT – although it’s since fallen 15%.
Nevertheless, optimists “abound”, but as with all commodities, high prices elicit increased supply. However, long term, countries might increasingly turn to ethanol as a clean fuel source. For this year, the International Sugar Organisation believes that consumption will outpace production by 2.225 million metric tons. That could be why “sugar will definitely outperform bonds and equities this year”, Andreas Mayer, founder of the Commodities Opportunities Fund, told Bloomberg.
Published in Commodities
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by
Annunziata Rees-Mogg
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