Sugar- Are High Highs on the Horizon?
In my late October 2023 Barchart article on the sugar futures market, I wrote:
The trend in any market is always your best friend. In late October 2023, the sugar #11 trend remains bullish, and a challenge of the 2011 36.08 cents level could be on the horizon.
On October 23, nearby March ICE sugar futures had risen to a 27.67 cents per pound high, the soft commodity’s highest price since 2011. In early November, sugar rose slightly higher at over the 28 cents per pound level as the bullish trend continued to sweeten.
New highs in sugar $11 as 30 cents could be the next stop
Sugar’s bullish trend that began at the 9.05 cents April 2020 low continues in late November 2023.
The chart highlights the pattern of higher lows and higher highs that took world sugar #11 futures to the latest 28.14 cents high in November. Sugar futures have over tripled in value to the highest price since 2011. The next technical resistance level is at the August 2011 31.85 cents high. Above there, the February 2011 36.08 cents peak is the next technical target.
All-time highs in U.S. subsidized sugar futures
Sugar #16 is the U.S. subsidized sugar futures contract.
U.S. subsidized sugar #16 futures reached 45.75 cents per pound in November, a record high. The U.S., Europe, and other countries support sugar prices to ensure the production of the critical commodity that is a crucial ingredient in food and is increasingly required for biofuel.
European white sugar #5 futures are trending towards the 2011 peak
White sugar future #5 trade on ICE in the European futures market.
The chart shows the rise to a $772.90 per ton high in November 2023, the highest price since 2011. The upside target for sugar #5 is the July 2011 $890.10 per ton peak.
As production costs increase, sugar futures have been rallying, and the supply-demand equation supports higher prices.
CANE is the only ETF that tracks sugar futures
U.S. sugar futures are highly liquid. The leading soft commodity had over 875,000 contracts of open long and short positions as of November 22. Daily volume is over 60,000 contracts. The liquidity supports ETF products, and the Teucrium Sugar ETF reflects the price of three actively traded sugar #11 futures contracts. The fund summary states:
CANE does not own the nearby futures contract, but three deferred sugar #11 contracts to minimize roll risks.
The forward curve highlights the backwardation with deferred prices lower than nearby sugar prices. However, the deferred prices have rallied over the past years.
CANE’s structure means it tends to underperform the nearby futures contract during rallies and outperforms the front month during downside corrections.
The most recent rally in the March #11 contract took the price 27.6% higher from 22.06 cents on June 29, 2023, to 28.14 cents on November 7.
Over the same period, CANE rose 25.6% from $12.35 to $15.51 per share. The ETF’s increase means the deferred contracts kept pace with the front month March sugar #11 futures contract since late June.
The action in the soft commodities sector supports higher sugar prices
Sugar #11 is a soft commodity trading on the U.S. Intercontinental Exchange with cotton, Arabica coffee, cocoa, and frozen concentrated orange juice futures. Soft commodities were the leading sector over the first three quarters of 2023, with a nearly 25% gain. In late November, four of the five soft commodities were higher than the end of September 2023 closing prices.
Meanwhile, cotton rose to its highest price at over $1.58 per pound since 2011 in May 2022. Arabica coffee futures reached $2.6045 per pound in February 2022, the highest price since 2011. In November, cocoa futures eclipsed the $4,000 per ton level for the first time since the late 1970s, and frozen concentrated orange juice rose over $4 per pound, an all-time high, in October and November 2023.
Soft commodities have been on bullish fire, and sugar #11, #15, and #5 are no exceptions. Expect sugar to challenge the 30 cents per pound level over the coming months as soft commodities remain bullish in late 2023.
More Softs News from Barchart
- Cotton Comes Out of the Holiday Weaker
- Cotton Heads Home For the Holiday Mixed
- Sugar Prices Slip on Weakness in the Brazilian Real
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.
