Sugar traders experienced a rollercoaster ride in recent years as world sugar futures on the Intercontinental Exchange (ICE) plummeted to 9.05 cents per pound in April 2020, marking the lowest price since June 2007 amidst the global pandemic. However, by November 2023, the price had surged, more than tripling to reach 28.14 cents per pound – the highest level since 2011.
ICE sugar futures closed 2023 with a 2.69% gain at 20.58 cents per pound, and by January 19, the price had risen even further, surpassing 23.57 cents. Despite a correction from the November 2023 high, sugar managed to maintain the critical technical support level of 20 cents.
World Sugar’s Volatility
ICE world sugar futures have a long-standing history of boom-and-bust price action. A long-term ICE sugar futures chart dating back to 1970 reveals the commodity’s significant volatility, which has persisted for over half a century.
Brazil’s Dominance in Sugar Production
Brazil, bestowed with a favorable tropical climate, stands as the leading producer and exporter of sugar globally. The nation’s dominance in sugarcane production has established it as the top player in the sugar market, with India following as the second-largest producer.
Sugar’s Link to Energy in Brazil
Sugar’s dynamic relationship with biofuel in Brazil creates a correlation with crude oil and gasoline prices. As crude oil prices rise, so does domestic Brazilian sugar demand, thereby limiting exports to the global market.
Release from 2020 Lows
Amid the market turmoil sparked by the global pandemic in April 2020, sugar prices hit multi-year lows. However, since then, world sugar #11 futures have displayed a persistent uptrend, witnessing higher lows and higher highs, culminating in an eleven-year high in 2023.
The Impact of CANE
The Teucrium Sugar ETF (CANE) serves as a direct avenue for exposure to the free-market world sugar market. Trading higher and lower in tandem with ICE futures, CANE reflects the price movements of sugar. As of January 19, CANE boasted over $17.3 million in assets under management, with an average daily trade volume of 40,055 shares.
The upward trajectory of sugar is enhanced by higher crude oil prices, positioning the commodity for further gains, provided that supply and demand fundamentals shift into a deficit. The potential exists for sugar to challenge the 2023 high, with resistance levels at 31.85 and 36.08 cents per pound potentially coming into play.
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