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Sugar #11 Basic Fundamentals

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Basic Fundamentals

What Market Fundamentals Can Affect The Sugar Futures?

When following the sugar market it is very important to closely monitor the supply and demand fundamentals:

The most important sugarcane producing countries are Brazil, India, and Thailand. All of these countries are anticipating bumper crops.

Brazil - Brazil is the largest producer of sugar. Sugar output in Brazil's main center-south cane producing region is expected to rise to record volume this season

India - India, the world's second-largest producer after Brazil, has allowed exports of 500,000 tonnes of sugar following a bumper crop.

Thailand - Thailand, the world's second-biggest exporter after Brazil, is forecast to produce a record 9.0 million, and export a record seven million tons of sugar in 2011.

When analysing demand you need to consider sugar import demand and Brazilian ethanol demand.

Import Demand - Buyers in China, the second largest consumer after India, may take advantage of the recent slump in prices to increase sugar imports in order to replenish their dwindling supplies.

Ethanol Demand - Brazil exports what it does not use domestically for ethanol. The sugar equivalent price of ethanol in Brazil is currently 18 to 20 cents a pound. The price of world sugar needs to drop below that level to encourage producers to reallocate cane to ethanol.

 These are just some of the basic fundamentals to keep in mind when you are considering a trade in the sugar market. Before opening up a commodity account to trade sugar you should consult with a licensed commodity broker that follows the sugar market to discuss investment strategies.

Click here to contact a commodities broker with experience in the sugar market.

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