Sugar Futures May Reverse on Looming Shortage in Brazil

With drought cutting into supplies in Brazil, the global sugar market is shaping up to be in its first deficit in half a decade (claims a top exporter and producer there). Sugar futures have recently climbed to .17 and one-fifth cent a pound in the larger rallies in two months.

Sugar futures have plummeted over 50% from their highs since 2011 as farmers planted more sugar cane, but now both Brazil and India are considering reducing sugar output (to reduce global reserves) for the first time in four years, the USDA estimates. Also, Brazil – which a forthcoming presidential election soon – has already raised the amount of sugar-ethanol used in fuel and may soon raise gasoline prices there.

The current drought has experts in the area predicting up to a 10% deficit, which would be the first in a handful of years,” said Laura Taylor, a senior commodities broker at RJO Futures in Chicago, sharing her insight regarding the current sugar futures situation. Taylor added,With sugar used for ethanol in that part of the world, and once the Brazilian elections are behind us and the government there set ethanol prices, we could see a significant low in sugar prices.”

The technical trend for sugar futures is at a crossroad. Sugar futures have technically crossed the uptrend threshold (in my work), but appear to be testing their recent lows. I must approach sugar futures with caution.

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