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Sugar ETPs Break Above Long-Term Trend Lines

This article was originally published on ETFTrends.com.

While the rest of the market was experiencing a volatile swing, sugar prices rallied from decade-long lows and commodity-related exchange traded products have broken above their long-term trend line.

On Wednesday, the iPath Series B Bloomberg Sugar Subindex Total Return ETN (SGGB) jumped 3.0% while Teucrium Sugar Fund (CANE) advanced 2.8%, breaking above its long-term resistance at the 200-day simple moving average. Over the past month, CANE gained 10.7% and SGGB increased 12.0%.

ICE sugar #11 futures gained 3.6% to $0.1373 per pound on Wednesday, surging 36% since its August lows.

Despite the rally in sugar prices, some traders remain cautious on the soft commodity's outlook. After a bumper crop year, India, the second largest producer of sugar, is expected to bolster exports or more than offset cutbacks in output elsewhere, adding on to another year of global surpluses, Bloomberg reported.

Meanwhile, rising health awareness in western markets have contributed to diminished appetites for sugar.

"I am not convinced that there is light at the end of the tunnel," John Stansfield, a trader at Group Sopex SA, said at a Marex Spectron Group seminar in London. "The elephant in the room is definitely India.”

World supply will outstrip demand by 5.8 million metric tons this season after a huge surplus of 11.8 million tons in the prior year, according to Sopex. The glut in global sugar supply is attributed to large production in countries like India and Thailand. Furthermore, there is now no limit on European output since quotas were removed in 2017.

Looking ahead, India is expected to contribute with another record harvest. In an attempt to help struggling mills and reduce the domestic glut in supply, India is expected to export an unprecedented 5 million tons of sugar this season.

“India has been a hot topic all this week,” Tom McNeill, a director at Green Pool, told Bloomberg. “The market would be in a deficit if it weren’t for India. Ultimately, a lot will depend on how Indian millers execute the deals, how the government follows up with subsidies and how the global market reacts.”

For more information on the sugar market, visit our sugar category.