Global Inflation and Droughts Push Sugar Prices Higher — Here’s Where the Market Could Go Next
July sugar futures (SBN26) are gaining traction as a mix of macroeconomic pressure and weather-driven supply constraints pushes prices higher. On Monday, the contract hit a four-week high, and technical indicators suggest the rally may have more room to run.
The daily bar chart shows a clear upward trend, with the moving average convergence divergence (MACD) indicator turning bullish. The blue MACD line has crossed above the red trigger line, and both are trending higher — a signal that momentum is shifting in favor of the bulls. For now, the near-term technical advantage belongs to buyers.
Fundamentally, the story is being shaped by global inflation fears that are lifting raw commodity prices across the board, led by crude oil. Drought conditions in India and Thailand — two of the world’s top sugar producers — have tightened global supplies. At the same time, high crude oil prices are incentivizing Brazil to divert more sugarcane toward ethanol production rather than sugar, further squeezing supply.
“This is a classic supply-side squeeze compounded by macro inflation,” said Maria Torres, a São Paulo-based agricultural analyst. “Brazil’s ethanol economics are pulling cane away from sugar mills, and that’s not going to change unless oil collapses.”
Others are more cautious. “I’ve seen this movie before — everyone piles in, and then the rains come or Brazil shifts back,” said Tom Hargrove, a veteran commodities trader in Chicago. “I wouldn’t chase this above 15.50 unless you’ve got a tight stop.”
From a trading perspective, a decisive move above chart resistance at 15.50 cents per pound could open the door to further gains. The upside price target in that scenario would be 17.25 cents or higher. On the downside, technical support sits at 14.75 cents, a level where traders might place protective sell stops.
“This rally feels like it’s got legs, but the fundamentals are fragile,” said Linda Park, a retail investor from New York who trades agricultural futures. “One good rain in India and everyone’s going to be scrambling for the exits. I’m staying nimble.”
Important Note: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any trades and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.
Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%):
On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com.