Sugar futures haven’t seen the massive volatility or the emotional headlines as other commodities this year. Part of the story is sugar hasn’t been directly affected by the Ukrainian conflict and the collateral damage that came with it. Sugar has been trapped within a $3.40 trading range for about a year now. What gives? The range bound movement has been like watching paint dry. The market peaked in September and October of ‘21 at 20.61 and 20.69 consecutively and found support around 17.25-63. Lower sugar output from the worlds number 1 sugar producer Brazil, and number 3, the EU have left the market elevated. Brazil and EU have both had their fair share dry and hot weather hurting yields. Higher energy prices have also pushed producers to in Brazil to ramp Ethanol production drawing from already dismal supply. The world’s second largest Sugar producer, India has announced more Sugar exports this week and into the end of the year. India’s government slowed sugar exports to build supply and fight domestic food inflation. Now its allowing exports to avoid contract defaults.

The biggest proponent on that I think can drive the price is energy. In Brazil, about half of sugar production goes to produce ethanol. India is also making a major push into biofuels in part of a bigger push to be energy independent. The Paris accord and de-commoditization of Russia has pulled this to the fore front. Looking back through historical charts of Sugar, we’ve seen many rallies predicated around global uncertainty. The historic inflation period of the 1970’s seems the most similar as today. The similarities range from rising interest rates, trade disagreements, geopolitical conflict, civil unrest all the way to rising food prices and energy.

The market has had low volatility and Sugar options are relatively cheap.