Sugar prices continued soaring this week as concerns about supplies continued. Data by TradingView shows that sugar cash contracts were trading at almost $27.35 on Wednesday, a few points below the year-to-date high of $27.75. In all, prices have surged by almost 200% from the lowest level in 2020.
Supply concerns remainSugar and several other commodities like orange juice, palm oil, and live cattle have jumped sharply this year. A key driver for this performance is lower supplies as key producing countries go through a drought.
The most recent WASDE report showed that sugar supply for the 2022/23 season would fall by over 178k tons because of lower yields in Louisiana, the biggest producing state in the United States.
The report also showed that US sugar supplies for 2023/24 season would fall by182k STRV because of weaker beginning stocks. Mexico’s production is also under pressure because of drought in key areas in the Western Pacific. The report added:
“Mexico production for 2023/24 is reduced by 225,000 MT to 5.575 million. Mexico is currently experiencing widespread drought conditions. Rainfall amounts for the April-September period have been at their lowest levels since 2013 in 12 out of the 15 states in which sugarcane is grown.”
Sugar prices have also jumped because of the ongoing crude oil surge. Brent jumped to $90 on Wednesday while West Texas Intermediate (WTI) roared back to $87. JP Morgan analysts see prices soaring to $150 in this bull run.
Sugar is an important part of the energy sector since it is used to manufacture biofuels. In most periods, sugar demand rises when the price of crude oil is in an uptrend.
Sugar prices forecast
The daily chart shows that sugar prices have been in a strong uptrend in the past few years. In this period, the price has jumped above the 50-day and 100-day moving averages. It is also approaching the important resistance level at $27.58, the highest point this year.
Sugar also soared above the key resistance level at $26.60 (June 21st high). The Relative Strength Index (RSI) has also drifted upwards. Therefore, sugar has the momentum to continue rising. If this happens, the next price to watch will be $30.
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