Sugar Futures: The Socioeconomic Impact on Stocks

Fundamentals

The price of sugar is exposed to many global and national influences. These include government tariffs, production costs, climate change, and geopolitical instability. These demand and supply factors all influence movement within the market.

Sugar-Weekly Chart

Most sugar production occurs in a few countries across the world. The top-producing countries include Brazil, India, and Thailand.

A report published in 2018 revealed evidence for the positive interdependence between crude oil and the world food price index, comprising the sub-categories dairy, cereals, vegetable oil, and sugar.

In various countries, sugar is considered a strategic commodity. For example, in Russia, the government heavily supports the growth of the sugar industry,

Since sugar is viewed as more of a luxury than a necessity, wealthier economies consume more than poor economies.

However, sugar hoarding during difficult times in poorer countries makes it a luxury and a highly desired commodity.

Emerging economies in Asia and South America are the fastest-growing sugar consumers, so continued strength in these economies is positive for prices.

So why are we tracking the price of sugar so carefully?

Over the weekend, we covered the significance of the January 6-month calendar range. That will set the tone for this week after many earnings, PPI, and Fed Speak.

And every instrument will create a range, including sugar.

Technicals

Sugar futures have traded between 17.5 cents and 21 cents for months. While many instruments traded to new multi-year lows in 2022, sugar has held steadfast.

On the weekly chart, sugar futures are in a bullish phase. On our Triple Play Leadership indicator, sugar has outperformed the benchmark since the fall of 2022.

And although the leadership has declined and now shows an on-par performance with the benchmark, we anticipate that sugar will remain an outperformer in 2023.

The Real Motion Indicator shows momentum as a bit underperforming the price as the momentum is slightly under the 50-DMA while the price is above it.

However, with Tuesday’s price action and the close above 20 cents (the chart had not yet been updated at the time of writing), we expect should that level hold, momentum will improve.

What is noteworthy is that the U.S. dollar rose in price, and sugar acted independently by gaining as well. As the 6-month calendar range will reset this week, remember that sugar also has a range.

Whether it is the weather, oil demand (ethanol) versus supply, social unrest (food hoarding), and government subsidies, should sugar clear 20.19 (Tuesday’s high), think bullish and inflationary.

Should this week begin as a one-day wonder and the price breaks below 18.92 cents, then assume we will see another trip to around 17.50 with inflation less of a concern.

We are banking on the former.

ETF Summary

• S&P 500 (NYSE:SPY): Closed above the 200-DMA, now has to stay above and clear 400.
• iShares Russell 2000 ETF (NYSE:IWM): Can this get through 190? A game-changer if does.
• Dow Jones Industrial Average ETF Trust (NYSE:DIA): Dec high 348.22 now looms.
• Invesco QQQ Trust (NASDAQ:QQQ): Right at the 200-WMA resistance 281.
• S&P Regional Banking ETF (NYSE:KRE): Still the most concerning sector with 60 pivotal and under 57 lights out. Needs to clear 65 to stay in the game.
• VanEck Semiconductor ETF (NASDAQ:SMH): Cleared the 50-WMA or 226 and now, if good, needs to stay above.
• iShares Transportation Average ETF (NYSE:IYT): Stopped at the 50-WMA or 231.50.
• iShares Biotechnology ETF (NASDAQ:IBB): 138.74 December high the place to clear with 130 key support.
• S&P Retail ETF (NYSE:XRT): Amazing how the Jan 6-month range and these 50-WMAs line up in the Economic Modern Family. 66.70 is the number to watch.