Too much sugar is bad for you

Sugar has surged 27% over the past 6 weeks.

Furthermore, it has risen 50% from a low seen on November 1st, 2022.

The chart below shows an empirical study of the percentage that the price of sugar has traded above its 200 week moving average.

Ordinarily, such rising inputs would normally affect the margins of chocolatiers, confectioners and soft drink manufacturers, however it seems these companies have managed to pass on higher costs under the story of wide spread inflation.

Many of their stock prices are performing very well.

The rising price of sugar is also a boon to sugar cane growers (with Brazil and India being the world’s two largest producers) and those around Mackay, Queensland.

Today, the price of sugar is trading in rarified air.

It is also registering overbought tendencies.

And when my analysis incorporates the outsized ‘long’ positions in the Commitments of Traders then I will recognise it as the momentum trade that it is.

In other words, the probability of higher prices diminishes under the current conditions and any unwinding of those non-commercial ‘trading longs’, can see a sharp drop and test of that 200 week moving average.

May 1, 2023

by Rob Zdravevski

rob@karriasset.com.au