4 Reasons You Might Invest in Sugar

Investors purchase soft commodities such as sugar for many reasons, but the following are most common: 

• Speculation 
• Inflation and Weak US Dollar Hedge 
• Bet on Emerging Market Demand Growth 
• Portfolio Diversification 

 

• Speculating on Sugar Prices 

 

Most sugar production occurs in a few countries, and weather patterns play an important role in determining supply. 

 

Sugar prices can be very volatile. Investors looking to speculate on short-term bottlenecks in supply might see sugar as an attractive investment. 

 

• How Does Sugar Act as an Inflation and Weak US Dollar Hedge? 

Most commodity investments, including sugar, are priced in US dollars and, therefore, are a way to bet on a weak US dollar. 

 

The US economy has relied disproportionately on consumer and government borrowing and spending over the past few decades. 

 

To incentivize borrowing, the Fed has kept interest rates low for a long period of time. 

 

Growing debts and deficits in the United States could put pressure on the dollar and boost sugar and other commodity prices. 

 

• Betting on Emerging Market Demand Growth 

Asian and other emerging economies are growing wealthier. 

 

As consumers in these countries accumulate more purchasing power, their appetite for sweet foods may grow as well. 

 

Investing in sugar might be a way to capitalize on these global trends. 

 

•  Diversify Your Portfolio 

Commodities such as sugar have historically had low correlations with stocks, bonds and other financial assets. 

 

Investing in sugar provides a way to diversify a portfolio and smooth out investment returns.