In all honesty, I don’t know where I stand in the genetically-modified crops argument.

On one hand, it’s not pleasant to think about eating a food that could technically be classified as a pesticide… But on the other hand, I really like baked goods.

#-ad_banner-#(In fact, I once opened my presentation at an international investment conference by talking about cake, but that’s a story for another time.)

In the end, though, it doesn’t matter what our personal beliefs are. One of the biggest “health” trends is non-GMO. And food companies are jumping on the bandwagon with both feet. And in a recent NPR story I learned that this shift is causing major changes in the sugar industry, of all places.

Here’s a bit of background.

The United States gets a lot of its sugar from sugar beets. These beets can be grown in colder climates, and it’s a major agricultural product. About half of the sugar produced in the United States comes from sugar beets.

But in 2008, farmers decided to switch their crops from regular sugar beets to genetically-modified sugar beets. The GMO beets were engineered to tolerate a weed killer called glyphosate. You probably know it better as Roundup.

The sugar beets have had a gene inserted into them that allows the plant to resist the Roundup. The modification allows farmers only have to spray weed killer a few times a season, instead of every ten days.

These days, practically our entire production of sugar beets comes from genetically-modified seed.

Enter the backlash that’s turned into a massive trend in the food industry.

While there’s always been an anti-GMO crowd — a very vocal one at that — the larger players in the food industry hadn’t bought in.

That’s changing. From NPR:

American Crystal is a cooperative, owned by sugar beet farmers like Andrew Beyer, from Kent, Minnesota. Beyer went to the company’s annual meeting earlier this year and was shocked to hear just how many of American Crystal’s customers — those pastry and chocolate companies — were moving away from sugar beets. “They were talking like a third or up to half of them were converting their systems to strictly non-GMO,” Beyer says.

That includes major chocolate companies like Hershey’s (NYSE: HSY), which is in the process of shifting its whole portfolio of candy out of GMOs, meaning the company is using a lot more sugar from sugarcane instead of beets.

Everyone is…

NPR reports that the switch to non-GMO sugar sources is putting sugar made from sugarcane into a crunch.

On May 5, 2016, 45 U.S. Representatives signed a letter asking Department of Agriculture Secretary Tom Vilsack to increase the tariff quota for raw sugar.

They said, “Calls for more adequate supplies have come not only from companies that use sugar, but also from U.S. cane refiners, including some of those owned by sugar growers.” This tight supply has sent futures prices higher…

Since late February, sugar prices have climbed 34%.

This food industry shift comes at a time when sugar cane production is down. El Nino has disrupted weather patterns in growing regions. Cane production in Thailand and India is down. In Brazil, political and economic uncertainty has production lower, too.

In other words, demand is up while supplies are down.

It’s a perfect recipe for higher prices. 

So, how do investors play this potential pop? For non-futures investors, there are three exchange-traded funds that give you access to sugar futures.

–    PowerShares DB Agriculture Fund (NYSE: DBA)
–    iPath Bloomberg Sugar Sub TR ETN (NYSE: SGG)
–    Teucrium Commodity Trust Sugar Fund (NYSE: CANE)

SGG and CANE are the purest plays, but both are fairly illiquid. That could make investing in them a bit tricky. SGG is a little less illiquid, but trades at an average dollar volume $2.73 million… Adequate, but still on the low side. SGG does offer options, though they are also lightly traded.

DBA tracks several agricultural products: corn, wheat, soybeans, live cattle, cocoa, hogs and sugar.

Though sugar makes up more than 7.2% of DBA’s portfolio, that could change, and it is far from a pure play.

That said, it’s a very popular ETF, strongly traded, with options for those of you who are interested.

And it somewhat trends in line with SGG and CANE, though without the added oomph of a pure sugar ETF.

Risks To Consider: This slight underperformance could magnify over the longer-term. Because DBA is not a pure play, it could be dragged down by other agricultural commodities. Another issue is that weather could ease up and give sugar-producing nations some much needed relief.

But even if the weather does begin to cooperate, the International Sugar Organization predicts a sugar shortfall of 5.02 million metric tons for the 2015-2016 year. Couple that with the massive shift to sugar cane from the GMO sugar beets, and sugar as a commodity is sure to get a big boost in prices.

Action To Take: Those investors with a slightly higher risk tolerance may want to take advantage of the pure sugar play, SGG. Those with less of a risk tolerance can turn to DBA for a sweet bump higher.

Sugar prices are at an interesting inflexion point, trading at yearly highs. But prices could shoot much higher. The price could climb another 8.77% before encountering any real resistance, and another 18.7% before it reaches its three-year high of $20.16.

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