In an October 31 Barchart article on the sugar futures market, I highlighted that:
Sugar futures posted an 11.67% gain in Q3 2024, making the sweet commodity the second-best performing soft commodity behind Arabica coffee beans. Sugar was 10.16% higher over the first nine months of 2024, settling Q3 at 22.67 cents per pound.
As the end of 2024 approaches, sugar futures have moved lower, with the March world sugar futures at just over the 21.40 cents per pound level. Brazil is the leading sugar-producing and exporting country. Meanwhile, Brazil is also the top producer and exporter of Arabica coffee beans, which took off on the upside, eclipsed the $3 level for the fourth time in history in November, and was flirting with a new record high in December. The price action in coffee and frozen concentrated orange juice futures, another Brazilian product, could mean that sugar prices will head higher after the current consolidation period. I concluded the October 31 article with:
CANE does an excellent job tracking the portfolio of three deferred world sugar futures contracts. If sugar futures are on a path to higher prices, following the other bullish soft commodities, CANE could be a product that sweetens your portfolio.
CANE was trading at $12.77 per share on October 29 and has edged lower to under $12.50 per share in mid-December 2024.
Sugar futures- Range trading
After reaching their highest level since 2011, 28.14 cents per pound, in November 2023, world sugar futures corrected, declining 37.74% to a 17.52 cents low in August 2024.
The weekly chart illustrates the 34.9% recovery from 17.52 cents per pound in August 2024 to 23.64 cents per pound in September 2024. While sugar futures have moved into a marginally bearish trend of lower highs and lower highs since the September 2024 peak, the continuous contract price has traded in a 20.70 to 23.64 range. At the 21.46 cents level, the sweet soft commodity was below the midpoint of the recent trading range.
Coffee explodes higher
While sugar prices have been stuck in neutral, coffee has taken the bullish baton in the soft commodities sector in late 2024.
The long-term monthly chart highlights the rally in ICE Arabica coffee futures, which took the price above $3 per pound for the fourth time since the 1970s. Coffee futures have reached $3.3640 per pound, just shy of the 1977 record peak of $3.3750.
FCOJ has been trading around $5 per pound, and cocoa remains on fire
Brazil is the world’s leading producer and exporter of three of the five soft commodities as the South American country produces sugarcane, Arabica coffee beans, and oranges.
The long-term quarterly FCOJ futures chart shows the rally that took the soft commodity well over $5 per pound. At over $4.90 on December 9, FCOJ was over double the pre-2023 record $2.2750 per pound high.
Adverse weather conditions in Brazil have lifted coffee and orange prices, and if the conditions persist, sugar prices could follow suit.
Cocoa, another soft commodity experiencing explosive gains, has rallied because of poor growing conditions in West Africa.
The quarterly ICE cocoa futures chart illustrates the rally that has taken cocoa beans over the $10,000 per ton level. Before 2024, the highest price was in 1977 at $5,104 per ton. Cocoa is at double the previous record peak.
The bullish case for sugar futures in 2025
While sugar’s short-term trend has been bearish over the past weeks, the path of least resistance since the 2020 pandemic-inspired low has been bullish.
The quarterly continuous world sugar futures chart shows the rally from the March 2020 9.21 cents per pound low. Technical resistance is at the 2023 28.14 high and the 2011 36.08 per pound peak. If sugar is on a path to follow, cocoa and FCOJ, the soft commodity, could have substantial upside potential. Sugar futures reached 44.80 cents per pound in 1980 and 66 cents in 1974.
Adverse weather conditions that have lifted coffee and orange prices in Brazil could affect the sugar market. Sugar is a crucial ingredient in many foods for Brazilian ethanol production.
CANE could sweeten portfolios in the coming year
At $12.51 per share, the Teucrium Sugar ETF product (CANE)was slightly lower than the October 29 price level. CANE owns a portfolio of three actively traded ICE world sugar futures contracts, excluding the nearby contract. The portfolio approach minimizes roll risks, and it causes CANE to tend to underperform the nearby contract during rallies and outperform during downside corrections. Most price volatility tends to occur in the nearby contract as it attracts the most speculative interest.
At $12.51 per share, CANE had over $15.9 million in assets under management. CANE trades an average of 66,743 shares daily and charges a 0.22% management fee.
If sugar prices are on track to follow coffee, FCOJ, and cocoa prices in 2025, the CANE ETF could sweeten your portfolio.
