Record heat in key parts around the globe could provide bullish momentum for sugar prices ahead of the holidays. This will bode well for funds investing in the commodity.
Large producers in Asia, namely India and Thailand, are providing push-pull factors for sugar prices. This could keep the prices in flux, which have been mostly heading lower since reaching a crescendo during the holidays in 2023.
One one hand, India could see heavy rains from a monsoon that could benefit sugar crop.
“Sugar prices have been under recent pressure on optimism that above-average monsoon rains in India will lead to a bumper sugar crop,” a Nasdaq report noted, adding that India’s monsoon season is typically during the months of June through September. “The Indian Meteorological Department reported today that India received 849.3 mm of rain during the current monsoon season as of September 13, or 8% more than the comparable long-term average of 784.3 mm.”
And on the other hand, Thailand could continue to see record heat that’s already been ravaging its sugarcane crops.
“Record heat in Thailand that may damage the country’s sugarcane crops is bullish for sugar prices,” the same Nasdaq report said. “On May 6, Thailand’s Meteorological Department said that more than three dozen of Thailand’s 77 provinces posted record-high temperatures in April, with new highs beating records as far back as 1958.”
Just to put the impact of India and Thailand production in perspective, both countries rank first and third, respectively in producing sugar as noted by Yahoo! Finance.
Brazilian Fires Affecting Production
Helping to boost sugar’s bullish case is also limited production from Latin America or notably, Brazil. The country just trails behind India as the top sugar producer and prices could see upward pressure due to fires.
“Fires in Brazil sugarcane fields in recent days have helped drive prices to a five-week peak and added to problems with the crop,” Reuters noted, saying that damage from the fires might be limited, but it could negatively impact production.
“Experts said that mills will lose sugar production from the fires and there will be problems for those burned fields next year, despite the land hit by the fires being small considering the Centre-South planted area,” the Reuters report added.
With potential bullish pressure ahead, investors can take advantage of lower sugar prices now. Funds like the Teucrium Sugar ETF (CANE ) can offer portfolio diversification with exposure to agricultural commodities like sugar, primarily via futures contracts.
For more news, information, and analysis, visit the Commodities Channel.
