Will Sugar Follow the Other Soft Commodities?

I asked if world sugar futures establish a bottom in a February 7, 2025, Barchart article. I concluded:

If sugar follows cocoa, coffee, and FCOJ in the soft commodities sector, the recent price action could be a consolidation period that leads to higher prices and a challenge of the 2023 peak at over 28 cents per pound. Brazil’s weather and sugarcane output are the most significant factors in the path of least resistance of the most liquid soft commodity. Time will tell if the sugar futures market holds the 17.52 support level, but the recent price action suggests it is a significant bottom for the sweet commodity. 

Nearby sugar futures were at 19.48 cents per pound on February 7, and the price moved slightly higher in March. However, sugar’s trend since the 2020 low remains higher as the price has held above the 17.52 cents per pound support level. 

Sugar holds above technical support 

The continuous ICE sugar futures contract made higher lows and higher highs from the 2020 pandemic-inspired low to the November 2023 high. 

The monthly chart highlights world sugar future’s 205.5% ascent from 9.21 cents in April 2020 to the November 2023 28.14 cents peak, where the sweet commodity ran out of upside steam. The nearby sugar futures corrected 37.7% to a 17.52 cents low in August 2024. After a recovery to 23.64 cents in September 2024, sugar futures declined to a higher 17.57 low in January 2025, leaving 17.52 cents per pound as the critical technical support level. 

The daily chart shows a bullish trend since late January

While the continuous contract fell to just over 17.50 cents, the low in the active month May ICE futures contract was 16.61 cents per pound on January 21, 2025.

The daily chart shows the bullish pattern in 2025. The May futures rose 20.3% from 16.61 cents in late January to 20.09 cents per pound on March 18. The May world sugar futures were at the 19.72 level on March 21. 

The all-time high was in 1974- Lots of upside room

The long-term sugar futures chart highlights that sugar peaked in the 1970s. 

The quarterly chart illustrates that sugar futures reached their long-term high in 1974 at 66.00 cents per pound. While sugar made lower highs over the past decades, three other soft commodities rose to record levels over the past months. Frozen concentrated orange juice, cocoa, and Arabica coffee futures on the Intercontinental Exchange rose to record levels in 2024 and 2025. Cocoa and Arabica coffee reached levels not seen since the 1970s. Brazil is the leading coffee-producing country. Adverse weather conditions, causing supply shortages, caused the rise of the three soft commodities. Brazil is also the leading producer of sugar in the world. 

Tariffs, subsidies, and the weather are critical factors for sugar prices

While the weather is always the most significant factor for the path of least resistance of agricultural products, tariffs, and subsidies also impact prices. Tariffs under the Trump administration create trade barriers that can increase price volatility, causing shortages in some regions and gluts in other areas. 

Sugar has another factor impacting prices. Many countries, including the United States, subsidize sugar production. Therefore, U.S. subsidized sugar prices are considerably higher than the world sugar prices.

Sugar #16 is the sweet commodity’s U.S. subsidized price. The quarterly chart shows that #16 sugar rose to a record 45.75 cents per pound high in late 2023. At 38.00 cents on March 21, 2025, it remains at over an 18 cents per pound premium to the world sugar #11 futures prices. Changes in subsidies and tariffs could cause volatility and higher prices in the world sugar prices over the coming months, as the U.S. has told markets that tariffs on Brazil are on the horizon.  

CANE is the sugar ETF product

The most direct route for a risk position in world sugar futures is the futures and futures options on the Intercontinental Exchange. Each contract contains 112,000 pounds of sugar, worth $22,086.40 at 19.72 per pound. Original margin requirements at $1,317 per contract mean a market participant can control $22,120 of sugar futures with a 5.96% downpayment. If equity drops below $1,198 per contract, the exchange requires variation margin. 

To minimize roll risks, the Teucrium Sugar ETF (CANE ) owns three actively traded ICE sugar futures contracts, excluding the nearby contract. At $12.61 per share, CANE had over $13.1 million in assets under management. CANE trades an average of 47,610 contracts daily and charges a 0.22% management fee. The latest rally in the nearby May futures took the price 20.95% higher from late January through late February. 

The chart displays CANE’s 19.1% rise from $10.77 to $12.83 per share over the same period. CANE tends to underperform the nearby sugar futures contract on the upside and outperform on the downside as the most speculative activity causing the highest volatility level is in the nearby ICE futures contract. 

Sugar futures remain in a bullish trend since the 2020 pandemic-inspired low. The price held a critical technical support level at the most recent January 2025 low. Time will tell if sugar can follow FCOJ, cocoa, and Arabica coffee futures with explosive gains. However, as the market heads into 2025’s second quarter, the sweet commodities path of least resistance remains bullish, and the trend is always our best friend.