Sugar price rockets higher as supply concerns continue

Sugar price continued its relentless rally on Wednesday amid rising concerns about India’s supplies. Data by TradingView shows that the price of sugar CFDs soared to $27, the highest level since May 16th. Some trading venue have it trading at the highest level in more than 9 years.

India sugar supply concerns

Sugar is one of the most important agricultural commodities in the world. It is consumed directly and indirectly by billions of people every day. Sugar is used both for human consumption and for energy. 

Like other agricultural commodities, sugar is facing the impact of climate change, with most producing countries having some shortages. The biggest sugar producing countries are Brazil, India, Thailand, and China. 

A key concern in sugar’s supply chain is India, which has gone through uneven weather conditions in the past few years. A recent report showed that India’s sugar output will drop by more than 32.8 million metric tons this year.

Therefore, investors are concerned that India could ban sugar exports for the first time in seven years. If this happens, it will lead to substantial supply disruptions internationally since other countries could follow.

Sugar prices also because of poor production in Europe, which is going through a major drought season. This drought also affected other agricultural products like olive oil, wheat, and palm oil.

Sugar price is also rising as the price of crude oil rebounds. Brent, the international benchmark, rose to $90 and some analysts warn that it could hit $100 in the coming weeks.

The soaring oil prices could lead to more sugar demand for energy purposes. This happens mostly in Brazil, a country that has a strong market share in biofuels. 

Looking ahead, the biggest catalyst for sugar prices will be the decision by India about an eventual ban. Traders will also pay a closer attention to the upcoming monsoon season in India.

Sugar price forecast

Sugar chart by TradingView

The daily chart shows that the sugar price has been in a strong bullish trend for months. This week, the price managed to flip the important resistance level at $25.58 into a support level. The price has jumped above the 25-day and 50-day exponential moving averages (EMA).

It is also attempting to move above the important resistance at $26.60, the highest level on June 21st. Therefore, the outlook for sugar is bullish, with the next important level to watch being at $27.550, the highest point on April 27th.