Bullish Factors Could Keep Sugar Prices Higher Into 2024

Sugar prices have been one of the better-performing commodities in 2023. That winning streak could potentially extend into 2024 as bullish factors remain.

Amid a more active holiday season as consumers transition back into a post-COVID environment, prices for this commodity have remained stubbornly high. India, one of the top suppliers of it worldwide, has been hit with droughts that are disrupting supply chains and keeping these prices elevated. This also resulted in export restrictions, which have been constricting supply even further.

“The US sugar market appears in a state of flux amid uncertain supply (both domestic and global) and demand expectations for the 2023-24 marketing year that began Oct. 1. Prices remain historically high,” reported the Food Business News.

Investors who maintained positions in this commodity have greatly benefited for much of the year, especially when compared to the performance of stocks and bonds. The S&P GSCI Sugar index has risen above both the S&P 500 and S&P Bond Index.

^SGSH Chart

^SGSH data by YCharts

Weather Still a Concern for Sugar Supply

The El Nino weather pattern continues to be a major disruption when it comes to supply. That should keep sugar prices bullish even heading into the new year. The World Meteorological Association is anticipating the El Nino climate will continue into 2024, thereby affecting sugar supply further.

“An El Nino weather pattern typically brings heavy rains to Brazil and drought to India, negatively impacting sugar crop production,” Barchart explained. “The last time El Nino brought dryness to sugar crops in Asia was in 2015 and 2016, which caused prices to soar.”

Investors who want to continue taking advantage of rising sugar prices may want to consider the Teucrium Sugar ETF (CANE). While there are exchange-traded note options available, CANE is currently the only sugar ETF on the market. It’s accessible to investors who want a convenient way to get exposure to this commodity, whether it’s to hedge against inflation and/or to diversify a portfolio to get exposure to commodities that are uncorrelated to traditional assets like stocks or bonds.

That inflation hedge component is especially crucial in the current macroeconomic environment given the uncertainty of when the U.S. Federal Reserve will loosen monetary policy in 2024 or keep it tight. The markets fully expect the Fed to eventually lower interest rates, especially after the recent rate pause. Nonetheless, there’s no determining exactly when inflation’s extended stay will come to an end.

For more news, information, and analysis, visit the Commodities Channel.