The Sugar Trade

from the New York Post

from the New York Post

While everyone is reading that New York Post article about how many times a day Hank Paulson and Lloyd Blankfein call each other, the story the Post picked up on sugar trading from Bloomberg this morning was way more interesting to me.

From the NYP:

Sugar is the new crude oil for investment-hungry hedge funds, which are pushing sugar prices near 30-year highs and ushering new global shortages.

After their infamous and massive bets on crude oil sent prices doubling and brought $5-a-gallon gasoline a year ago, hedge funds are now pouring their billions into raw sugar.

Sugar prices have doubled since springtime, causing US officials to consider lifting tariff barriers so that more imported sugar can reach food and candy makers.

There are only a handful of ways to get exposure to sugar on the stock market right now:

One is an ETN (exchange traded note) that invests directly in sugar futures which bizarre industry regulations prohibit me from mentioning here without adding massive disclaimers that I don’t feel like typing out. 

Another is AGCO Corp (AGCO), which is the largest seller of equipment to the Brazilian sugar production complex, but the company recently gave lackluster Q4 guidance due to a farm spending slowdown in its US business. 

The sugar play that most are familiar with though is Imperial Sugar (IPSU).  This is a refiner that I don’t know much about these days, but it was a real rock and roll name a few years back.  Recently, IPSU had a major plant explosion which would probably be the first thing you should look into on this company!

What’s driving sugar is a confluence of supply shortages due to the weather (massive drought in India) and a big increase in global usage.  In addition to the NYP/ Bloomberg article, I’ll post some other links for those who wish to learn more about the sugar story and how to play it.

Start here:

Hedge Funds Find New Sweet Spot in Sugar (NYP)

India’s Sugar Crop Wilts Amid Drought (WSJ)

Playing the Sugar Rush (SeekingAlpha)

Imperial Sugar Plant Explosion (Reuters)

Full Disclosure:  I am not currently long or short any of the stocks mentioned in this post for either client or personal accounts.  Nothing on this site should ever be interpreted as advice, research or an invitiation to buy or sell any securities.  See my Terms & Conditions page for a full disclaimer.

What's been said:

Discussions found on the web
  1. keith piccirillo commented on Sep 30

    I’ve been waiting for our government to lift the ban on sugar for over a year. Cuba or Jamaica is another avenue to get it here that may factor in.
    The ethanol lobby in the president’s home state is being protected, but it can’t last forever. I just hope to be in CZZ when they are either taken over, or the tariff tax is lifted.
    ANDE is another company, and for those who believe sugar has come too far, SSUG is a london short.
    Thanks for the report.

  2. keith piccirillo commented on Sep 30

    I’ve been waiting for our government to lift the ban on sugar for over a year. Cuba or Jamaica is another avenue to get it here that may factor in.
    The ethanol lobby in the president’s home state is being protected, but it can’t last forever. I just hope to be in CZZ when they are either taken over, or the tariff tax is lifted.
    ANDE is another company, and for those who believe sugar has come too far, SSUG is a london short.
    Thanks for the report.

  3. rofs commented on Oct 01

    “sugar prices near 30-year highs”

    is it not too late then to buy sugar?

  4. rofs commented on Oct 01

    “sugar prices near 30-year highs”

    is it not too late then to buy sugar?