Sugar looks sweet...but will history repeat?

Key Points

• After successfully testing a multi-year low, sugar has recently rebounded strongly
• However, history suggests that traders be very cautious (i.e., use tight stops) about trading the long side…
• …and look for an opportunity to play the short side in the months ahead

Sugar price action is arguably very favorable

The chart below shows price action for sugar futures for the past several years.

The key thing to note is how often sugar successfully tested the 17.50-18.00 range without breaking lower. This type of long-term support level can be a launching pad for a significantly higher move. And as we see at the far right, so far so good for sugar. Prices have bounced over 18% higher in the last month and moved back above the 70-day exponential moving average.

In terms of pure trend, the long side of sugar appears like the place to be as it is hard to argue a bearish case for sugar. But it may be a good time to pay close attention.

Sugar is entering its weakest seasonal time of year

Sugar has a long history of being a very cyclical market. The chart below shows the annual seasonal trend for sugar futures. As highlighted in red, this market is entering what is generally the weakest time of year.

As always, it is important to remind people that seasonality is backward-looking-i.e., it is simply an average of the past-and should never be thought of as a roadmap for what will happen in the current year. Still, history is what it is for sugar.

The chart below shows the annual seasonal trend, with price action for sugar so far this year overlaid. Early-year weakness was followed by a strong rebound into late February. This type of action is fairly typical for sugar.

The period of typical seasonal weakness highlighted above extends from the close of Trading Day of the Year (TDY) #35 through TDY #87. For 2025, this period extends from the close on 2025-02-21 through 2025-05-07.

The table below summarizes sugar performance during the TDY #35 to #87 period.

What the research tells us…

The chart and table above show the historical tendency for weakness during early spring. That said, it must be noted that a 31% Win Rate means that sugar has advanced and not declined in roughly 3 out of every 10 years during this period (i.e., this is no bearish "sure thing"). Additionally, in 2023, sugar futures rallied over $5,300 in contract value during this purportedly "bearish" period - and over $3,000 during four other years (i.e., do not sell short and stubbornly hold on without a stop-loss). Given the history combined with recent price action, the message appears to be "Don't fight the trend, BUT be alert for an opportunity to play the short side in the months ahead."