Andrew Hecht
4 min read
I asked in a Barchart article if the price consolidation of sugar would end on May 2, 2025. I concluded:
Given the price action in Arabica coffee, cocoa, and FCOJ futures over the past months, sugar could offer value. Deferred sugar futures at prices lower than the nearby contract do not reflect the potential for supply issues in the world free-market sugar market.
July sugar futures were at the 17.05 cents level on May 2 and were around the 16.00 cents per pound level on June 18, in a bearish trend. Events in the Middle East could lead to a recovery in sugar due to their correlation with oil prices.
The nearby continuous sugar futures contract reached a high of 20.19 cents per pound on February 6, 2025, marking the peak for 2025.
The chart shows a pattern of lower highs and lower lows, which sent the July sugar futures to a 15.80 cents per pound low on June 18. At below 16 cents, world sugar futures remain in a bearish trend just above the most recent low.
The monthly chart highlights the bearish trend since November 2023, when the price reached a multi-year high of 28.14 cents per pound.
The monthly chart illustrates that critical technical support for world sugar futures is now at the March 2021 low of 14.67 cents. Resistance is at the September 2024 high of 23.64 cents. At around 16 cents, sugar futures remain in a longer-term bearish trend.
While the United States refines corn into ethanol for blending with gasoline, Brazil, the world’s leading sugarcane producer, processes the sweet commodity into biofuel. Therefore, higher crude oil and gasoline prices could put upward pressure on world sugar futures as increased energy demand limits Brazil’s sugar exports.
The daily NYMEX crude oil futures chart for July delivery highlights the 42.9% rally from $54.33 on April 9 to $77.62 per barrel on June 13.
Over the same period, nearby NYMEX gasoline futures prices rallied 24% from $1.8720 on April 9 to $2.3208 per gallon wholesale on June 18.
The turmoil in the Middle East could send crude oil and gasoline prices substantially higher over the coming days, weeks, and months. Higher energy prices would likely cause an increase in Brazilian domestic sugar consumption, reducing exports and putting upward pressure on prices. Therefore, higher crude oil and gasoline are not bearish for the world sugar futures.
