El Niño's "Sweet Tooth" Leads To Disruptions In Sugar Production And Action In The Markets

The global sugar market is likely to see a surge in prices in 2024 driven by an unusual dry spell in sugar-producing regions like India and Thailand. The dry spell is a knockdown effect of the climate pattern known as El Niño and is marked by above-average temperatures.

Driven by warm ocean waters in the tropical Pacific, El Niño has caused extreme weather globally, leading to abnormally dry conditions in Asia and impacting sugar production.

This effect leads some to say that El Niño has a “sweet tooth”, gobbling up sugar production as it shifts weather across the globe. Speaking to CNBC, the head of agri commodities market research at Netherlands-based Rabobank, Carlos Mera quipped, “You can say El Niño has a sweet tooth because it sort of eats or takes away much of the sugar in the world…”

Effects On Pricing 

Retail prices for sugar and sweets are predicted to increase by 5.6% in 2024 according to the US Department of Agriculture, well above the historical average.

Developing countries, where sugar is a significant caloric source, are particularly vulnerable to rising prices. The potential consequences pose challenges to at-risk populations.

US consumers on the other hand may be shielded from much of these increases thanks to domestic pricing regulations. 

Opportunities For Investors

Understanding the impact climate has on US agriculture is critical for investors looking to get involved. Individual investors can get involved in the commodities markets by trading futures, but this can be a complicated practice out of reach of many investors. Even for seasoned traders, pitfalls abound.

Another alternative is investing in a commodity ETF, like those offered by Teucrium Investment Advisors, LLC. The firm offers a host of agricultural funds carefully curated to give investors simple, liquid access to commodities funds like Teucrium Sugar ETF CANE.

The Charts

According to Benzinga's Melanie Schaffer, CANE is trading in a quintuple inside bar pattern on the daily chart, which is currently in neutral territory. On Friday, the fund was falling below the eight-day exponential moving average, which leans bearish for at least short-term continuation to the downside.

Traders and investors can watch for the ETF to eventually break up or down from the Dec. 28 mother bar on higher-than-average volume to indicate the future direction of the fund.Photo by Alexander Grey on Unsplash