Investors miss out on sugar rush as they flee commodities ETFs

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Buyers have missed out on the most recent rally in sugar as change traded funds dedicated to the candy stuff have suffered outflows regardless of hovering costs for the commodity.

Poor crops in India and Thailand because of the re-emergence of the El Niño climate system and export restrictions in India have pushed sugar costs to ranges not seen in more than a decade.

Some buyers cashed out after a leap in sugar costs earlier within the 12 months and didn’t return to the market, that means they didn’t benefit from the bump within the second half of 2023, in keeping with funding circulate information from Morningstar.

There was a mixed $25mn in web outflows from the Teucrium Sugar change traded fund (CANE) within the US and the WisdomTree Sugar change traded commodity (SUGA) within the UK over the 12 months to October. Even so, the 2 sugar funding automobiles overcame plummeting costs in late June to generate returns of about 70 per cent, in keeping with Morningstar.

“Buyers offered out after the spring rush they usually haven’t come again,” stated Jake Hanley, senior portfolio strategist at Teucrium.

Belongings in US commodities ETFs on the entire have fallen from about $141.8bn in January 2022 to about $124.4bn as of September 2023, whilst US ETF property general have steadily grown, in keeping with Morningstar.

Whereas costs of soft commodities similar to sugar and cocoa have soared to multiyear highs in latest months, prices of different essential agricultural commodities similar to wheat and corn have plummeted on the again of bumper crops in large producing international locations.

Vitality ETFs have been a latest shiny spot whereas funds for treasured metals like gold have suffered outflows, in keeping with information supplied by Invesco. In terms of sugar-specific funding automobiles, buyers don’t seem to have chased efficiency over the second half of the 12 months, regardless of costs that rose past spring’s highs.

Buyers in single-commodity funds like CANE and others that Teucrium specialises in had been predominantly hedge fund merchants and commodity buying and selling advisers, Hanley stated.

“An enormous a part of my job is to teach of us on why they may think about publicity to sugar particularly and agriculture generally,” Hanley stated.

WisdomTree’s director of macroeconomic analysis, Aneeka Gupta, acknowledged that buyers appeared to have misplaced out on the rise within the value of sugar and will not purchase again in.

She added that she thought logistical issues affecting exports from Brazil — which has been choosing up the slack left from shortfalls in India and Thailand — may imply that the sugar value might climb larger.

“There’s a little bit of room to catch up in upside efficiency,” Gupta stated.

Extra reporting by Susannah Savage in London