Why Not Invest In The Price Appreciation Of... Sugar?
Price inflation, both the news and the fear of it, has been omnipresent lately. We have seen price appreciation appear in key commodities like energy, wheat, corn, and so on. But what about sugar? We have not seen a significant rise in the price of sugar in the last 12 months, approximately. Is it fair to forecast that sugar may be next to start a move higher?
Truth to be told, we have no clue about the supply/demand dynamics in the sugar market. So, this is purely based on commodities trends as well as the sugar price chart.
First of all, food price inflation is real. The macro environment has been pushing several food commodities much higher lately. Stated differently, if there is a moment for a commodity like sugar to appreciate in price, it should be in 2022.
Next, we must look to the sugar price chart. We need to zoom out and check the monthly chart in order to understand the dominant pattern. The monthly sugar price chart has a very clear bullish reversal that started with the sell-off in 2012. We saw a spike in 2016 which seemed to be the second leg of a giant W structure.
Right now, sugar is consolidating. There is a very high probability that it is working on a breakout. We consider the 0.22–0.24 area the breakout level. Although the price of sugar has been range-bound for almost a year now, we can easily see that it might come to an end in the not too distant future.
So, how to invest in the potential price appreciation of sugar? An accessible ETF with decent daily trading volume is likely to be the way to park some of your hard-earned money in this trend for the lowest risk.
But remember to protect yourself. If sugar falls below 0.17, it may not be ready to rise just yet. Maybe it won’t - there are always multiple sides to consider. On the flipside, if the breakout succeeds, we see at least a 50% upside potential in the price of sugar, if not more. A slow but steady investment is how we think one should approach investing in sugar.
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