In an August 27 Barchart article, I asked if sugar futures prices can recover. I concluded:
If the price action in coffee, cocoa, and FCOJ is a guide, sugar futures can recover with significant upside potential.
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.
Nearby sugar futures were trading at 18.39 cents per pound on August 23 after falling to a continuous contract low of 17.52 cents.
The nearby March 2025 world sugar futures contract was around 22 cents per pound in late October, as the price found a bottom in August. The Teucrium Sugar ETF (CANE) tracks a portfolio of three ICE world sugar futures contracts, excluding the nearby contract.
World sugar futures recover
The continuous ICE world sugar futures contract reached 28.14 cents per pound in November 2023, the highest price since October 2011, when it ran out of upside steam.
The monthly chart highlights the downside correction that took world sugar futures 37.7% lower to a 17.52 cents August 2024 low. Sugar futures found a bottom above the September 2022 17.19 cents technical support level and recovered, reaching the latest 23.64 cents high on the continuous contract in September 2024. At the 22 cents per pound level at the end of October, sugar futures remain significantly higher than the August low.
Brazil is critical for production- Sugar is food and fuel
Brazil is the world’s leading free-market sugarcane-producing and exporting country.
The chart shows Brazil’s dominance in annual sugar production. Sugar’s recent rally occurred as dry conditions in Brazil have begun impacting market sentiment, with sugar production forecasts revised downward for 2024 and 2025.
Sugar is an ingredient in many food products and fuels. In Brazil, sugar is the primary ingredient in ethanol production, making sugar prices sensitive to gasoline and oil prices. The escalating conflict in the Middle East and potential for supply concerns could boost biofuel prices and sugar, in addition to Brazil’s adverse weather conditions.
FCOJ and cocoa have reached record highs- Coffee is trending toward a critical upside target
Sugar is a soft commodity, and the softs have led the commodities asset class higher in 2023 and through the first nine months of 2024. The composite for five soft commodities, including sugar, Arabica coffee, cotton, cocoa, and frozen concentrated orange juice futures, rose by over 36% over the first three quarters of 2024.
In 2024, frozen concentrated orange juice prices reached a new record high at over $5 per pound before correcting. Brazil is also the world’s leading orange-producing country. Cocoa prices have soared to record highs in 2024.
Meanwhile, Brazil also leads the world in Arabica coffee production and exports.
The monthly chart illustrates the bullish trend in ICE Arabica coffee futures over the past few years. Adverse Brazilian weather conditions and crop diseases have pushed coffee bean prices higher. The chart shows that the upside target in the Arabica coffee futures market is over the $3 per pound level. The futures traded to $2.7505 per pound at the most recent high. Coffee futures have only eclipsed the $3 level three times in 2011, 1997, and 1977.
Sugar’s record peak is triple the current price
While cocoa and FCOJ prices reached record highs in 2024, and coffee could be on a path to challenge the psychological $3 long-term technical resistance, world sugar futures remain far below their record peak.
The long-term chart dating back to the early 1960s shows world sugar futures reached a record 66 cents per pound high in 1974. Over the years, technical resistance is at the November 1980 44.84 cents high, and the 36.08 cents February 2011 peak. At between 22 and 23 cents per pound, sugar futures could have considerable upside technical room if supply concerns continue to rise.
CANE is the sugar ETF product
The most direct route for a risk position in the world sugar futures market is the futures and futures options trading on the Intercontinental Exchange. Sugar is the only soft commodity with an ETF product that follows the futures prices.
At $12.77 per share, the Teucrium Sugar ETF (CANE) had over $15.658 million in assets under management. CANE trades an average of nearly 50,000 shares daily and charges a 0.22% management fee. To minimize roll risks, CANE maintains a portfolio of three actively traded ICE world sugar futures contracts, excluding the nearby contract. Therefore, CANE tends to underperform the continuous world sugar futures contract on the upside and outperforms during downside corrections.
The latest rally in world sugar futures took the sweet commodity 34.9% higher from the 17.52 August 2024 low to the 23.64 cents per pound September 2024 high.
The CANE ETF rallied 25.8% from $10.91 to $13.73 per share over the same period.
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.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
