Originally published Apr. 11, 2023 by TraderStef on CrushTheStreet (updated)
There was a corner candy store in the blue-collar neighborhood of single-family homes in the city where I grew up, and my friends and I had the pick of anything behind a glass-enclosed counter for one penny. When Grandma provided the weekly $0.25 allowance, it was like Halloween every day for a week. Bazooka bubble gum, Chiclets, PEZ candy for my refillable dispenser, gummy bears, Pixy Stix, Pop Rocks, Candy Buttons, candy necklaces, and Bit-O-Honey (aka Mary Jane) were the few among many to choose from that filled my pockets. As it turned out, the two elderly sisters who owned and tended that corner store without a storefront sign were busted a couple of decades later because their house was a front for cocaine distribution. It’s a long story, but it was interesting when youth had you believe we never grow old.
We later learned that sugar was not the healthiest diet to have as research surfaced over the years that discovered a Standard American Diet (SAD) was a killer and sugar was a favorite food for cancer cells. Despite what most are aware of by now, too many folks continue eating sugar-laden or “sugar-free” drinks and processed foods because they were misled to believe that ultra-processed food, diet soda, and a multitude of artificial sweeteners such as aspartame and Splenda are safe and healthy. Nothing could be further from the truth. I suggest you pay close attention to ingredient labels, trade SAD for unprocessed whole foods, consume raw sugar in moderation, and avoid high-fructose corn syrup like the plague. My syrup of choice is tapped from maple trees in New Hampshire where I prefer to Live Free or Die.
The price of sugar broke out to the upside this year to a 6.5-year high yesterday in New York due to several factors. The Indian government lowered its sugar cane production estimate from its initial estimate last summer, which created a squeeze in the sugar market amid tight supply. India is the #1 exporter of sugar in the world. Raw sugar rallied 5% last week and 4% today on concerns about slower production in India and lessened supply from other countries, including Pakistan and Thailand. April is a critical time for Brazil’s sugar harvest, and above-average rainfall is forecast, which could impact crops and the harvest timeline, but a large crop in Brazil is expected that could ease tightness in the market.
Prices are also supported due to oil’s recent rally that could spur Brazil and India’s sugar mills to divert more cane to making ethanol since mills in India have already begun closing earlier than normal. Also, sugar demand rises as the consumption of cold drinks and ice cream climbs during the summer months in India from April to June. The closing inventory for the season could fall to 5.5 million tonnes, the lowest in six years. Demand in India has rebounded after being disrupted by the pandemic and is estimated to rise to a record 28 million tonnes this year as the world supply is lackluster and exports from India are being reduced. India’s sugar mills have only exported 6.1 million tonnes this season compared to the 11 million last season.
Sugar Futures Jump to Highest in a Decade on Shortage Worries… “‘The sugar market is really tight,’ said Francois Thaury, an analyst at Paris-based adviser Agritel. ‘We have had downward revisions on production in major countries.’ A large crop in Brazil could help ease the market tightness, but ‘Brazilian volumes are deeply needed, but they are not there yet,’ according to Covrig Analytics.” – Bloomberg, Apr. 10
Let’s move on to a technical analysis of sugar futures and an ETF, but let’s first look at a few data points on production estimates and a seasonality chart. Be mindful that a weekly chart analysis focuses on the potential price movement for a few weeks. To view a larger version of any chart below, mouse over it to select or right-click and choose a view image option.
“Sugar can be produced from two separate crops: sugarcane or sugar beets. Both versions are 99.95% pure sucralose, rendering them chemically and nutritionally identical to most users. However, their production processes are slightly different. Most notably, cane sugar is often whitened using bone char, which renders it non-vegan in the eyes of some consumers.”
Sugar No. 11 ICEUS Futures quarterly chart 3Q71 to Apr. 11, 2023, 4pm ET…
The futures quarterly chart provides a good overview of the price action and shows typical seasonal rallies that occur during the spring and summer months. After taking out the overhead 50 Exponential Moving Average (EMA) in the spring of 2021, there was an extended period of consolidation until pandemic lockdowns came to an end, and it has rallied since January of this year. The 2016 high was taken out this week with a powerful rally that’s making a run for the 38.2% Fibonacci at $26.84. The next significant resistance is around $34 at the 50% Fibonacci level and a trendline drawn down from the 1980 high. Today’s price action closed at $24.37. Momentum to the upside is in play but be cautious of a breather that’s likely in the near term.
The DMI-ADX is in an Alligator Tongue power trend, the StochRSI is in overbought territory, and buy Volume was strong with a rising trend in 4Q22 and 1Q23. The chart is bullish.
$CANE Sugar ETF weekly chart as of Apr. 11, 2023, 4pm ET…
The CANE weekly chart printed a low during the pandemic panic in the early spring of 2020 and then rallied with a buy Volume spike in the summer that left the 2011 trendline in the dust. A Broadening Top has developed since the late summer of 2021 that consolidated the price, and the current rally breached the topside trendline three weeks ago. This rally is powerful and overextended with a breather due in the near term. Today’s price action closed at $12.47 and has the 38.2% Fibonacci at $13.13 in its sights. The next significant resistance level is around $15, where two laterals are drawn from 2016 and 2017.
The DMI-ADX is in an Alligator Tongue power trend, the StochRSI is in overbought territory, and buy Volume was strong with a rising trend during the previous three weeks. The chart is bullish.
Colt Clark and the Quarantine Kids play “Sugar Sugar” by the Archies
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Headline Collage Art by TraderStef
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