Sugar prices seem to to have bottomed out and have begun working on a rally, booming investor demand.
The sugar prices slided to a 10-year low at 9.83 cents per pound last year on expectations for a global glut of sugar and tremendously low crude oil prices. Sugar and oil are linked because top-grower Brazil uses sugar to produce ethanol, much as U.S. farmers use corn to make biofuel. As oil prices rise and fall, so too does demand for the biofuel feedstocks.
The recent rally in oil from $42 per barrel at the end of 2018 to $52 on Friday has helped boost sugar prices, but so too have concerns about drought in Brazil reducing this year’s sugarcane harvest. A smaller crop could drop Brazil’s exports to the lowest level in over a decade, which is boosting prices globally, nearing 13 cents per pound this week.
According to the report by Walt & Alex Breitinger Paragon Investments
For the average American, the recent 30% jump in the global market won’t affect prices at the grocery store significantly. Imported sugar is taxed heavily as part of a government effort to support American sugarcane and sugar beet farmers, leading to much higher U.S. prices. So, while global sugar futures went from under 10 cents last fall to nearly 13 cents this week, the corollary U.S. futures contract moved from a low of 24.94 cents to a high of 25.6 cents this week.
