Futures ETF KMLM Goes Long Sugar Before Halloween
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Call it sweet timing. The $357 million KraneShares Mount Lucas Managed Futures Index Strategy ETF (KMLM) recently shifted from a short to long position in sugar ahead of peak candy season.
The fund’s move comes as U.S. consumers prepare to spend around $3.5 billion on Halloween candy this year, according to the National Retail Federation.
The sugar market is “relatively balanced, but a few million tons of production either way” can take “a balanced market to unbalanced really quickly” and have dramatic effects, said Gerald Prior, Chief Operating Officer, Senior Portfolio Manager and Managing Partner at Mount Lucas.
Sugar Price Impact
KMLM’s systematic trend-following strategy allocates about 7% to sugar futures as part of its broader portfolio spanning 22 futures markets, Prior said. The timing is notable as Brazil, the world’s largest sugar exporter, faces production uncertainty due to weather and farming conditions that could impact global supplies heading into 2025.
While Halloween candy demand typically doesn’t move sugar markets significantly, Prior noted that extreme price changes could affect consumer behavior.
“If that candy bar gets too expensive, you'll probably have some unhappy kids because you have more people handing out apples and bananas,” Prior said.
CANE ETF Tracks Sugar's Price
Investors wanting direct exposure to sugar can invest in the Teucrium Sugar ETF (CANE), which tracks the price of the commodity through futures contracts, rather than directly investing in sugar companies or the physical commodity itself.
CANE is designed for investors seeking exposure to the price movements of sugar for reasons like inflation hedging or portfolio diversification, particularly in the agricultural commodity space. However, because CANE is based on futures, it is susceptible to volatility and contango (a situation where future prices are higher than current spot prices), which can impact its performance relative to the actual price of sugar over time.