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Poor Brazilian Weather Makes Sugar ETN Look Sweet


A sugar exchange traded note jumped over its short-term trend line Monday, with sugar prices hitting a four-week high as traders take bearish bets on poor weather conditions in Brazil, a leading producer of sugarcane.

The iPath Dow Jones-AIG Sugar Total Return Sub-Index ETN (SGG) rose 3.0% Monday, crossing its 50-day simple moving average. The ETN, though, has declined 18.4% year-to-date.

Brazilian harvests have been delayed as rains cover Brazil’s central-south region, the main sugar producing area, reports Emico Terazono for the Financial Times. Traders are trying to hedge against a loss of sucrose in the cane, which would hinder sugar output.

“We’re picking up some short covering,” Michael McDougall at commodities broker Newedge, said in the Financial Times article. “The volumes are quite big.”

Sugar futures were up 2.7% Monday, trading around $16.9 per pound, a four-week high.

Moreover, concerns over frost damage to sugar canes has also weighed on investors after about two years of large harvests coming out of Brazil. Frost would “shock” the plants into flowering and reduce yields.

“The only supply for the October delivery will be Brazil,” Naim Beydoun, a broker at Swiss Sugar Broker in Rolle, Switzerland, said in a Bloomberg article. “It may be one or more trade houses are positioning for this on the long side.”

iPath Dow Jones-AIG Sugar Total Return Sub-Index ETN

For more information on sugar, visit our sugar category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.