Read this article to learn about commodities CFD trading.
Sugar is a soft commodity, one that is grown as opposed to one which is extracted through mining, such as copper, which is a hard commodity. Like all commodities, sugar has a unique weighting of factors which will influence its price.
While government’s trade policies are the main influence on the price of sugar, weather is an important factor too, making the price of sugar subject to sudden fluctuations. Brazil is the world’s largest sugar producer, followed by India, the EU and China. India is also the world’s largest consumer.
The price of sugar reached a 29-year high on 1 February, 2010 as investors reacted to reports that sugar harvests in Brazil and China for 2009-10 were going to be worse than expected. Since that time though it looks like both the harvests in India and Brazil will actually be much better than had previously been predicted.
This has caused a change in sentiment among investors, and the price of sugar has fallen 43% since February 1. If a commodity price is falling it’s only human nature for buyers just to hold on a little bit longer just to see whether they can get the cheapest possible price and this has also dampened the demand for sugar.
However, what buyers and investors can’t predict is the weather of course. If India was to experience a difficult monsoon season then this could alter prospective sugar yields making the commodity more favourable to investors eager to take advantage of any price increases due to falls in supply levels.
So what next for the price of sugar?
If you’re planning to make a success of trading long-term it really does pay to constantly work on improving your knowledge of the financial market you want to trade.
There are common factors that influence all commodities. It’s important to understand to what extent these factors will alter the price of a commodity.
For instance, the price of Gold and the US dollar are very closely linked, as many investors use the relative stability of the former to hedge against a weakness in the price of the latter. Another would be the price of oil, which is heavily influenced by consumer and industry demand.
CFD trading is fast becoming a popular way to trade commodities. IG Markets is one of the leading CFD providers in the UK. They offer the very latest expert market commentary and analysis to help you become a better, more successful trader.
Make sure you are aware of and take advantage of the risk management tools that are available, especially guaranteed stops.
CFDs are a leveraged product and can result in losses that exceed your initial deposit. CFD trading may not be suitable for everyone, so please ensure that you fully understand the risks involved.
