The bears are getting a sweet tooth

Due to several factors, sugar prices have risen impressively since the beginning of 2023. While production in India has been below expectations, and a stronger Brazilian currency and ethanol prices threaten exports. However, the beneficial weather could produce a record-breaking harvest, pushing sugar prices down. Higher US interest rates are dampening investors' risk appetite.

Sugar prices have been rising for the past three months, driven mainly by supply chocks. India has restricted supply for a few months, only to find that demand was much higher than expected, pushing up sugar prices. Brazil has done the opposite, having until now opted to build stocks. In this case, a stronger Brazilian currency combined with higher ethanol prices could lead to falling sugar prices towards the autumn.

After a period of strength, global equity markets are entering a recovery phase, with the rising US 2-year Treasury yield likely to be a contributing factor. From a technical point of view, lower stock prices may be necessary for the market to regain momentum.

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