Buying Sugar Call Options to Profit from a Rise in Sugar Prices

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12 Simple Tips to Prevent Blood Sugar Spikes

Blood sugar spikes occur when your blood sugar rises and then falls sharply after you eat.

In the short term, they can cause lethargy and hunger. Over time, your body may not be able to lower blood sugar effectively, which can lead to type 2 diabetes.

Diabetes is a rising health problem. In fact, 29 million Americans have diabetes, and 25% of them don’t even know they have it ( 1 ).

Blood sugar spikes can also cause your blood vessels to harden and narrow, which can lead to a heart attack or stroke.

This article looks at 12 simple things you can do to prevent blood sugar spikes.

Carbohydrates (carbs) are what cause blood sugar to rise.

When you eat carbs, they are broken down into simple sugars. Those sugars then enter the bloodstream.

As your blood sugar levels rise, your pancreas releases a hormone called insulin, which prompts your cells to absorb sugar from the blood. This causes your blood sugar levels to drop.

Many studies have shown that consuming a low-carb diet can help prevent blood sugar spikes ( 2 , 3 , 4 , 5 ).

Low-carb diets also have the added benefit of aiding weight loss, which can also reduce blood sugar spikes ( 6 , 7 , 8 , 9).

There are lots of ways to reduce your carb intake, including counting carbs. Here’s a guide on how to do it.

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Summary: A low-carb diet can help prevent blood sugar spikes and aid weight loss. Counting carbs can also help.

Refined carbs, otherwise known as processed carbs, are sugars or refined grains.

Some common sources of refined carbs are table sugar, white bread, white rice, soda, candy, breakfast cereals and desserts.

Refined carbs have been stripped of almost all nutrients, vitamins, minerals and fiber.

Refined carbs are said to have a high glycemic index because they are very easily and quickly digested by the body. This leads to blood sugar spikes.

A large observational study of more than 91,000 women found that a diet high in high-glycemic-index carbs was associated with an increase in type 2 diabetes ( 10 ).

The spike in blood sugar and subsequent drop you may experience after eating high-glycemic-index foods can also promote hunger and can lead to overeating and weight gain ( 11 ).

The glycemic index of carbs varies. It’s affected by a number of things, including ripeness, what else you eat and how the carbs are cooked or prepared.

Generally, whole-grain foods have a lower glycemic index, as do most fruits, non-starchy vegetables and legumes.

Summary: Refined carbs have almost no nutritional value and increase the risk of type 2 diabetes and weight gain.

The average American consumes 22 teaspoons (88 grams) of added sugar per day. That translates to around 350 calories (12).

While some of this is added as table sugar, most of it comes from processed and prepared foods, such as candy, cookies and sodas.

You have no nutritional need for added sugar like sucrose and high-fructose corn syrup. They are, in effect, just empty calories.

Your body breaks these simple sugars down very easily, causing an almost immediate spike in blood sugar.

Studies show that consuming sugars is associated with developing insulin resistance.

This is when the cells fail to respond as they should to the release of insulin, resulting in the body not being able to control blood sugar effectively ( 13 , 14 ).

In 2020, the US Food and Drug Administration (FDA) changed the way foods have to be labeled in the US. Foods now have to display the amount of added sugars they contain in grams and as a percentage of the recommended daily maximum intake.

An alternative option to giving up sugar entirely is to replace it with natural sugar substitutes.

Summary: Sugar is effectively empty calories. It causes an immediate blood sugar spike and high intake is associated with insulin resistance.

At present, two out of three adults in the US are considered to be overweight or obese (15).

Being overweight or obese can make it more difficult for your body to use insulin and control blood sugar levels.

This can lead to blood sugar spikes and a corresponding higher risk of developing type 2 diabetes.

The precise ways it works are still unclear, but there’s lots of evidence linking obesity to insulin resistance and the development of type 2 diabetes ( 16 , 17 , 18 ).

Weight loss, on the other hand, has been shown to improve blood sugar control.

In one study, 35 obese people lost an average of 14.5 pounds (6.6 kg) over 12 weeks while they were on a diet of 1,600 calories a day. Their blood sugar dropped by an average of 14% ( 19 ).

In another study of people without diabetes, weight loss was found to decrease the incidence of developing type 2 diabetes by 58% ( 20 ).

Summary: Being overweight makes it difficult for your body to control blood sugar levels. Even losing a little weight can improve your blood sugar control.

Exercise helps control blood sugar spikes by increasing the sensitivity of your cells to the hormone insulin.

Exercise also causes muscle cells to absorb sugar from the blood, helping to lower blood sugar levels (21).

Both high-intensity and moderate-intensity exercise have been found to reduce blood sugar spikes.

One study found similar improvements in blood sugar control in 27 adults who carried out either medium- or high-intensity exercise ( 22 ).

Whether you exercise on an empty or full stomach could have an effect on blood sugar control.

One study found exercise performed before breakfast controlled blood sugar more effectively than exercise done after breakfast ( 23 ).

Increasing exercise also has the added benefit of helping with weight loss, a double whammy to combat blood sugar spikes.

Summary: Exercise increases insulin sensitivity and stimulates cells to remove sugar from the blood.

Fiber is made up of the parts of plant food that your body can’t digest.

It is often divided into two groups: soluble and insoluble fiber.

Soluble fiber, in particular, can help control blood sugar spikes.

It dissolves in water to form a gel-like substance that helps slow the absorption of carbs in the gut. This results in a steady rise and fall in blood sugar, rather than a spike ( 24 , 25 ).

Fiber can also make you feel full, reducing your appetite and food intake ( 26 ).

Good sources of soluble fiber include:

  • Oatmeal
  • Nuts
  • Legumes
  • Some fruits, such as apples, oranges and blueberries
  • Many vegetables

Summary: Fiber can slow the absorption of carbs and the release of sugar into the blood. It can also reduce appetite and food intake.

Not drinking enough water can lead to blood sugar spikes.

When you are dehydrated, your body produces a hormone called vasopressin. This encourages your kidneys to retain fluid and stop the body from flushing out excess sugar in your urine.

It also prompts your liver to release more sugar into the blood ( 27 , 28 , 29 ).

One study of 3,615 people found that those who drank at least 34 ounces (about 1 liter) of water a day were 21% less likely to develop high blood sugar than those who drank 16 ounces (473 ml) or less a day ( 28 ).

A long-term study on 4,742 people in Sweden found that, over 12.6 years, an increase of vasopressin in the blood was linked to an increase in insulin resistance and type 2 diabetes ( 30 ).

How much water you should drink is often up for discussion. Essentially, it depends on the individual.

Always make sure you drink as soon as you’re thirsty and increase your water intake during hot weather or while exercising.

Stick to water rather than sugary juice or sodas, since the sugar content will lead to blood sugar spikes.

Summary: Dehydration negatively affects blood sugar control. Over time, it can lead to insulin resistance and type 2 diabetes.

Vinegar, particularly apple cider vinegar, has been found to have many health benefits.

It has been linked to weight loss, cholesterol reduction, antibacterial properties and blood sugar control ( 31 , 32 , 33 ).

Several studies show that consuming vinegar can increase insulin response and reduce blood sugar spikes ( 31 , 34 , 35 , 36 , 37 ).

One study found vinegar significantly reduced blood sugar in participants who had just consumed a meal containing 50 grams of carbs. The study also found that the stronger the vinegar, the lower the blood sugar ( 31 ).

Another study looked into the effect of vinegar on blood sugar after participants consumed carbs. It found that vinegar increased insulin sensitivity by between 19% and 34% ( 37 ).

The addition of vinegar can also lower the glycemic index of a food, which can help reduce blood sugar spikes.

A study in Japan found that adding pickled foods to rice decreased the glycemic index of the meal significantly ( 38 ).

Summary: Vinegar has been shown to increase insulin response and help control blood sugar when taken with carbs.

Studies show both chromium and magnesium can be effective in controlling blood sugar spikes.

Chromium

Chromium is a mineral that you need in small amounts.

It is thought to enhance the action of insulin. This could help control blood sugar spikes by encouraging the cells to absorb sugar from the blood.

In one small study, 13 healthy men were given 75 grams of white bread with or without chromium added. The addition of chromium resulted in about a 20% reduction in blood sugar following the meal ( 39 ).

However, findings on chromium and blood sugar control are mixed. An analysis of 15 studies concluded that there was no effect of chromium on blood sugar control in healthy people ( 40 ).

Recommended dietary intakes for chromium can be found here. Rich food sources include broccoli, egg yolks, shellfish, tomatoes and Brazil nuts.

Magnesium

Magnesium is another mineral that has been linked to blood sugar control.

In one study of 48 people, half were given a 600-mg magnesium supplement along with lifestyle advice, while the other half were just given lifestyle advice. Insulin sensitivity increased in the group given magnesium supplements ( 41 ).

Another study investigated the combined effects of supplementing with chromium and magnesium on blood sugar. They found that a combination of the two increased insulin sensitivity more than either supplement alone ( 42 ).

Recommended dietary intakes for magnesium can be found here. Rich food sources include spinach, almonds, avocados, cashews and peanuts.

Summary: Chromium and magnesium may help increase insulin sensitivity. Evidence shows they may be more effective together.

Cinnamon and fenugreek have been used in alternative medicine for thousands of years. They have both been linked to blood sugar control.

Cinnamon

The scientific evidence for the use of cinnamon in blood sugar control is mixed.

In healthy people, cinnamon has been shown to increase insulin sensitivity and reduce blood sugar spikes following a carb-based meal ( 43 , 44 , 45 , 46 ).

One of these studies followed 14 healthy people.

It found that eating 6 grams of cinnamon with 300 grams of rice pudding significantly reduced blood sugar spikes, compared to eating the pudding alone ( 45 ).

However, there are also studies that show cinnamon has no effect on blood sugar.

One review looked at 10 high-quality studies in a total of 577 people with diabetes. The review found no significant difference in blood sugar spikes after participants had taken cinnamon ( 47 ).

There are two types of cinnamon:

  • Cassia: Can come from several different species of Cinnamomum trees. This is the type most commonly found in most supermarkets.
  • Ceylon: Comes specifically from the Cinnamomum verum tree. It is more expensive, but may contain more antioxidants.

Cassia cinnamon contains a potentially harmful substance called coumarin.

The European Food Safety Authority (EFSA) has set the tolerable daily intake of coumarin at 0.045 mg per pound of body weight (0.1mg/kg). This is around half a teaspoon (1 gram) of Cassia cinnamon for a 165-pound (75-kg) person (48).

Fenugreek

One of the properties of fenugreek is that the seeds are high in soluble fiber.

This helps prevent blood sugar spikes by slowing down the digestion and absorption of carbs.

However, it appears that blood sugar levels may benefit from more than just the seeds.

In one study, 20 healthy people were given powdered fenugreek leaves mixed with water before they ate. The study found the fenugreek reduced their blood sugar levels after eating by 13.4%, compared to the placebo ( 49 ).

An analysis of 10 studies found that fenugreek significantly reduced blood sugar two hours after eating ( 50 ).

Fenugreek may help reduce blood sugar spikes. It can be added to food, but it does have quite a strong taste, so some people prefer to take it as a supplement.

Summary: Both cinnamon and fenugreek are relatively safe. They may have beneficial effects on your blood sugar if you take them with a meal that contains carbs.

Berberine is a chemical that can be extracted from several different plants (51).

It has been used in traditional Chinese medicine for thousands of years. Some of its uses include cholesterol reduction, weight loss and blood sugar control ( 52 , 53 ).

Berberine reduces the amount of sugar produced by the liver and increases insulin sensitivity. It has even been found to be as effective as some drugs used for type 2 diabetes ( 54 , 55 , 56 , 57 ).

One study looked at 116 people with type 2 diabetes who either received berberine or a placebo for three months. Berberine reduced blood sugar spikes after a meal by 25% ( 58 ).

However, another study found berberine caused side effects in some people, such as diarrhea, constipation and gas ( 59 ).

Although berberine appears to be fairly safe, speak to your doctor before taking it if you have any medical conditions or are taking any medication.

Summary: Berberine has minimal side effects and studies have shown it can reduce blood sugar spikes by 25% after you eat it.

If you really want to reduce your blood sugar spikes, you should also consider these lifestyle factors that can affect blood sugar.

Stress

Stress can negatively affect your health in a number of ways, causing headaches, increased blood pressure and anxiety.

It has also been shown to affect blood sugar. As stress levels go up, your body releases certain hormones. The effect is to release stored energy in the form of sugar into your bloodstream for the fight-or-flight response (60).

One study of 241 Italian workers found an increase in work-related stress was directly linked to an increase in blood sugar levels ( 61 ).

Actively addressing stress has also been found to benefit your blood sugar. In a study of nursing students, yoga exercises were found to reduce stress and blood sugar spikes following a meal ( 62 ).

Sleep

Both too little and too much sleep have been associated with poor blood sugar control.

A study in 4,870 adults with type 2 diabetes found those who slept for the longest or shortest durations had the poorest blood sugar control. The best control was found in those who slept between 6.5 and 7.4 hours a night ( 63 ).

Even having one or two bad nights can affect your blood sugar levels.

A study of nine healthy people showed that sleeping too little, or only for 4 hours, increased insulin resistance and blood sugar levels ( 64 ).

With sleep, quality is as important as quantity. A study found the deepest level of sleep (NREM) to be most important in terms of controlling blood sugar ( 65 ).

Alcohol

Alcoholic drinks often contain a lot of added sugar. This is particularly true for mixed drinks and cocktails, which can contain up to 30 grams of sugar per serving.

The sugar in alcoholic drinks will cause blood sugar spikes in the same way as added sugar in food. Most alcoholic drinks also have little or no nutritional value. As with added sugar, they are effectively empty calories.

Furthermore, over time, heavy drinking can decrease the effectiveness of insulin, which leads to high blood sugar and can eventually lead to type 2 diabetes ( 66 ).

However, studies show that moderate, controlled drinking can actually have a protective effect when it comes to blood sugar control and can also lower the risk of developing type 2 diabetes ( 67 , 68 , 69 ).

One study found that drinking moderate amounts of alcohol with meals may reduce blood sugar spikes by up to 37% ( 70 ).

Summary: Poor sleep, stress and high alcohol intake all negatively affect blood sugar. That’s why it is important to consider lifestyle interventions as well as diet.

Simple dietary changes, such as sticking to a low-carb, high-fiber diet and avoiding added sugars and refined grains, can help you avoid blood sugar spikes.

Exercising regularly, maintaining a healthy weight and drinking plenty of water can also have added benefits to your health beyond helping to control your blood sugar.

That said, if you have any medical conditions or are on any medications, speak to your doctor before making any changes to your diet.

For most people, making these simple diet and lifestyle changes is a great way to lower your risk of developing insulin resistance or type 2 diabetes.

Call Option

What is a Call Option?

A call option, commonly referred to as a “call,” is a form of a derivatives contract that gives the call option buyer the right, but not the obligation, to buy a stock Stock What is a stock? An individual who owns stock in a company is called a shareholder and is eligible to claim part of the company’s residual assets and earnings (should the company ever be dissolved). The terms “stock”, “shares”, and “equity” are used interchangeably. or other financial instrument Financial Assets Financial assets refer to assets that arise from contractual agreements on future cash flows or from owning equity instruments of another entity. A key difference between financial assets and PP&E assets – which typically include land, buildings, and machinery – is the existence of a counterparty. at a specific price – the strike price of the option – within a specified time frame. The seller of the option is obligated to sell the security to the buyer if the latter decides to exercise their option to make a purchase. The buyer of the option can exercise the option at any time prior to a specified expiration date. The expiration date may be three months, six months, or even one year in the future. The seller receives the purchase price for the option, which is based on how close the option strike price is to the price of the underlying security at the time the option is purchased and on how long a period of time remains till the option’s expiration date. In other words, the price of the option is based on how likely, or unlikely, it is that the option buyer will have a chance to profitably exercise the option prior to expiration. Usually, options are sold in lots of 100 shares.

The buyer of a call option seeks to make a profit if and when the price of the underlying asset increases to a price higher than the option strike price. On the other hand, the seller of the call option hopes that the price of the asset will decline, or at least never rise as high as the option strike/exercise price before it expires, in which case the money received for selling the option will be pure profit. If the price of the underlying security does not increase beyond the strike price prior to expiration, then it will not be profitable for the option buyer to exercise the option, and the option will expire worthless, “out of the money”. The buyer will suffer a loss equal to the price paid for the call option. Alternatively, if the price of the underlying security rises above the option strike price, the buyer can profitably exercise the option.

For example, assume you bought an option on 100 shares of a stock, with an option strike price of $30. Before your option expires, the price of the stock rises from $28 to $40. Then you could exercise your right to buy 100 shares of the stock at $30, immediately giving you a $10 per share profit. Your net profit would be 100 shares, times $10 a share, minus whatever purchase price you paid for the option. In this example, if you had paid $200 for the call option, then your net profit would be $800 (100 shares x $10 per share – $200 = $800).

Buying call options enables investors to invest a small amount of capital to potentially profit from a price rise in the underlying security, or to hedge away from positional risks Risk and Return In investing, risk and return are highly correlated. Increased potential returns on investment usually go hand-in-hand with increased risk. Different types of risks include project-specific risk, industry-specific risk, competitive risk, international risk, and market risk. . Small investors use options to try to turn small amounts of money into big profits, while corporate and institutional investors use options to increase their marginal revenues Marginal Revenue Marginal Revenue is the revenue that is gained from the sale of an additional unit. It is the revenue that a company can generate for each additional unit sold; there is a marginal cost attached to it, which has to be accounted for. and hedge their stock portfolios.

How Do Call Options Work?

Since call options are derivative instruments, their prices are derived from the price of an underlying security, such as a stock. For example, if a buyer purchases the call option of ABC at a strike price of $100 and with an expiration date of December 31, they will have the right to buy 100 shares of the company any time before or on December 31. The buyer can also sell the options contract to another option buyer at any time before the expiration date, at the prevailing market price of the contract. If the price of the underlying security remains relatively unchanged or declines, then the value of the option will decline as it nears its expiration date.

Investors use call options for the following purposes:

1. Speculation

Call options allow their holders to potentially gain profits from a price rise in an underlying stock while paying only a fraction of the cost of buying actual stock shares. They are a leveraged investment that offers potentially unlimited profits and limited losses (the price paid for the option). Due to the high degree of leverage, call options are considered high-risk investments.

2. Hedging

Investment banks and other institutions use call options as hedging instruments. Just like insurance, hedging with an option opposite your position helps to limit the amount of losses on the underlying instrument should an unforeseen event occur. Call options can be bought and used to hedge short stock portfolios, or sold to hedge against a pullback in long stock portfolios.

Buying a Call Option

The buyer of a call option is referred to as a holder. The holder purchases a call option with the hope that the price will rise beyond the strike price and before the expiration date. The profit earned equals the sale proceeds, minus strike price, premium and any transactional fees associated with the sale. If the price does not increase beyond the strike price, the buyer will not exercise the option. The buyer will suffer a loss equal to the premium of the call option. For example, suppose ABC Company’s stock is selling at $40 and a call option contract with a strike price of $40 and an expiry of one month is priced at $2. The buyer is optimistic that the stock price will rise and pays $200 for one ABC call option with a strike price of $40. If the stock of ABC increases from $40 to $50, the buyer will receive a gross profit of $1000 and a net profit of $800.

Selling a Call Option

Call option sellers, also known as writers, sell call options with the hope that they become worthless at the expiry date. They make money by pocketing the premiums (price) paid to them. Their profit will be reduced, or may even result in a net loss, if the option buyer exercises their option profitably when the underlying security price rises above the option strike price. Call options are sold in the following two ways:

1. Covered Call Option

A call option is covered if the seller of the call option actually owns the underlying stock. Selling the call options on these underlying stocks results in additional income, and will offset any expected declines in the stock price. The option seller is “covered” against a loss since in the event that the option buyer exercises their option, the seller can provide the buyer with shares of the stock that he has already purchased at a price below the strike price of the option. The seller’s profit in owning the underlying stock will be limited to the stock’s rise to the option strike price but he will be protected against any actual loss.

2. Naked Call Option

A naked call option is when an option seller sells a call option without owning the underlying stock. Naked short selling of options is considered very risky since there is no limit to how high a stock’s price can go and the option seller is not “covered” against potential losses by owning the underlying stock. When a call option buyer exercises his right, the naked option seller is obligated to buy the stock at the current market price to provide the shares to the option holder. If the stock price exceeds the call option’s strike price, then the difference between the current market price and the strike price represents the loss to the seller. Most option sellers charge a high fee to compensate for any losses that may occur.

Call vs. Put Option

A call and put option are the opposite of each other. A call option is the right to buy an underlying stock at a predetermined price up until a specified expiration date. On the contrary, a put option is the right to sell the underlying stock at a predetermined price until a fixed expiry date. While a call option buyer has the right (but not obligation) to buy shares at the strike price before or on the expiry date, a put option buyer has the right to sell shares at the strike price.

A Sugar Price Forecast For 2020 And 2021

Our sugar price forecast is neutral to mildly bullish for 2020 and 2021 based on supply demand forecasts, inflation and sugar’s price chart

Our annual sugar price forecast is neutral to mildly bullish for 2020 and 2021. Note that the previous forecast was neutral to mildly bearish, which appeared to be an accurate forecast. We look at supply and demand in the global sugar market, as well as our inflation indicator and obviously the long term sugar price chart. Note that this article is part of our annual series of forecasts. Starting this year we combine 2 years so it’s not a 2020 forecast vs. a 2021 forecast. We consider this sugar price forecast to be one of the must read forecasts of InvestingHaven’s research team especially because of the level of accuracy of our previous sugar price forecasts.

Before we look in the details we want to note that doing a sugar price forecast is a challenge. There are multiple factors that determine the price of sugar, one of which being supply/demand. Moreover, sugar is subject to the volatility which is typical for commodities markets.

Summary of our Sugar Price Forecast for 2020 and 2021

Let’s start with our conclusion. Readers who don’t want to understand our underlying forecasting method can ignore the rest of the article.

We conclude that the price of sugar will be neutral to mildly bullish in 2020 and 2021. Even though a spike from the the $12 area (at the time of writing) to the $16 area is possible we emphasize this would be a temporary spike. It is likely that $16 will provide too much resistance to break out in 2020 or 2021.

These spikes which we predict may reflect a (temporary) 25 pct price rise. However, this is not the type of bull market that makes us warm, on the contrary it’s far from interesting in our view. That’s because supply demand factors in the global sugar market combined with lack of inflation is not supporting a fundamentally sound bull market.

In case the sugar price succeeds in breaking through the $16 resistance line will we see a strong bull market. Not likely, but important enough to mention.

The bearish scenario will kick in once sugar falls below $10 with 3 to 5 consecutive weekly closes.

Sugar Price Predictions for 2020 and 2021

This table is a summary of the trends we expect in the coming years. It reflects our sugar price forecast for 2020 and 2021.

This is our forecasted sugar price for the coming years. Prices reflect the spot price for sugar.

Year Sugar price forecast Conditions Invalid
2020 Neutral with a bullish bias Continuation of sugar supply/demand + a flat commodities trend If sugar breaks below 10.60
2021 Neutral with a bullish bias Continuation of sugar supply/demand + a flat commodities trend If sugar breaks below 10.60
2022 Potentially bullish (subject to revision) N/A N/A

Supply Demand Forecast of 2020

Supply and demand factors in the sugar market were not favorable at the start of 2020. Below is an extract of what we wrote in our 2020 forecast.

As per this article on sugar supply/demand factors “sugar’s supply surplus will eventually push prices so low that production takes a hit. Sugar prices may see a rise to around 15 cents sometime in 2020 as the cost of production for efficient producers such as Brazil and Thailand stands at roughly 12 cents to 14 cents a pound. Prices will, of course, go up as producers go bankrupt, but that is a very slow process.

World sugar production is forecast to reach a record level of 187.6 million metric tons in the 2020-18 marketing year, according to the United Nations’ Food and Agriculture Organization, or FAO. That would mark an increase of just over 11% from the previous year.

We concluded: “The point is a global supply surplus.”

Our forecast appeared to be spot-on. But that doesn’t tell anything about the future, so we have to revise the current global supply demand situation for future sugar price predictions.

Supply Demand Factors In The Global Sugar Market

So far the supply/demand picture from last year. Those were not supportive of higher sugar prices. This, combined with the set up of the sugar price chart, made us conclude that our sugar price forecast 2020 was neutral with a bearish bias.

This article features Jose Orive, executive director of the International Sugar Organization. We are no experts in the sugar market, especially not in the supply and demand factors. So we have to rely on what other experts say, and try to assess the reliability of their forecast as well as the relevance for the price of sugar. That’s a crucial aspect of our sugar price forecast.

Supply Demand Forecast for 2020 in the Sugar Market

Mr. Orive forecasts “a global sugar deficit of about 3.5 million tonnes in 2020-20, growing to nearly 6 million tonnes in 2020-21, compared with global surpluses of 2.1 million tonnes in 2020-19 and 9.7 million tonnes in 2020-18.

The world is still suffering from high accumulated stocks that will need to be absorbed by the market before we can see any improvement on price,” Mr. Orive explained.

Mr. Orive is optimistic because production from major sugar suppliers appears to be declining, which will let stocks fall.

So this sounds like the oversupply of recent years is in the process of turning into a global deficit.

Mr. Orive continues:

We’re getting killed with consumption. The “war” on sugar, including sugar taxes in many countries. Recent years have shown a trend toward a slow but steady erosion in consumption. Annual consumption growth was about 2% in the mid-2000s but currently is below 1.5%. A considerable part of losses in consumption growth rates can be attributed to a slowing down in global population growth. But the sugar and health debate is starting to take its toll with the 2020-20 growth rate close to 1.39%.

And then you have the big picture supply demand factors suggesting a gradually declining demand for sugar. This obviously offsets the global deficit that is brewing.

Unpredictability of the Sugar Market and How It Affects Our Sugar Price Prediction

According to Jack Roney, director of economics and policy analysis for the A.S.A., the global sugar market is the most distorted commodity market in the world because of subsidies. “Today’s low prices are a result of these subsidies, and any bullish signals can be quickly undone by government intervention.”

Mr. Roney said the extreme volatility of the world market is the reason the United States has a sugar policy, and he urged governments around the world to put an end to competing subsidies.

“U.S. farmers are highly efficient, and we want to operate in a free market, but that cannot happen until all countries set aside their subsidies and let a real market form,” he concluded.

This obviously is a hugely important factor to take into account in the context of our sugar price prediction. Supply demand factors in the global sugar market are certainly a leading indicator for the price of sugar. But an unpredictable sugar market that can change fast, where weather can turn the market upside down, or a country suddenly can influence market dynamics makes a reliable prediction extremely challenging.

As an illustration this article on Indiatimes.com suggests that rising exports from India would lead to lower stock levels and consequently a mildly rising sugar price going into 2020. Based on a report the predicted sugar price rise is 8%.

Inflation as a Catalyst For Commodities and Sugar Prices

Interestingly, the price of sugar has provided a really strong leverage during inflationary periods in the last 2 decades.

If we take 2020 as an example there was a giant rally in the price of sugar. However, this came after a major bottom in inflation expectations which largely may explain the strong rise in the price of sugar. Moreover, there also was a supply deficit more than a supply surplus back then.

The years 2020 and 2020 were somehow similar in nature when it comes to inflation expectations.

Our most important inflation/deflation indicator does not seem to indicate a rising inflation. On the contrary it looks like inflation indicators suggest a flat commodity market in the years ahead, obviously until proven otherwise.

So based on our flat inflation indicator we believe commodity prices will remain largely suppressed. Sugar cannot expect a bullish boost from the commodity sector.

Sugar Price Targets Based on the Long Term Chart

The sugar price chart is really straightforward.

Most commodities charts tend to be very complex. They tend to have multiple patterns which are active simultaneously.

Not so with sugar.

Sugar’s long term price chart has this giant descending triangle with a top in 2020 and horizontal support at $10.50.

Before this we saw a clearly rising trend with distinct lower lows and higher highs, starting in 1999.

We expect the current triangle formation to continue in 2020 and 2021. Any trend change may potentially start in 2022 or later.

That’s why we believe the chart combined with leading indicators outlined above are nicely in synch. They suggest that the price of sugar may see a spike in 2020 or 2021 to the $16 area. Against the prices at the time of writing this is a 25 pct increase. Note that $16 is likely going to provide too much resistance to break out. Moreover we expect a classic spike followed by a decline, if and when this $16 is tested.

Although appealing this 25 pct is not the type of bull market that makes us warm to consider positions. In fact this is far from appealing. We don’t have any interest in this market as long as sugar trends within this descending triangle.

Note that the very long term sugar chart (37 years) does not add more value to our forecast than the one we used above (25 years).

Results of our previous Sugar Price Predictions

We want to be fully transparent with readers in all our forecasts, especially our annual forecasts.

That’s why we include this overview with our previous sugar price predictions. It appears that our first sugar price prediction was published last year. We don’t have as many forecasts as compared to for instance gold, silver, stock indexes.

This is an overview of our sugar price forecasts from last year. We published this forecast early in the year. Prices reflect the spot price for sugar.

Year Our forecast Highs Lows Accuracy of our outlook
2020 None 21.62 12.60 N/A
2020 None 15.29 10.00 N/A
2020 Neutral to mildly bearish 13.51 10.73 Spot-on

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Soaring Sugar Cost Arouses Consumers And U.S. Inquiries

By Isadore Barmash

    Nov. 15, 1974

At the first of the year, sugar sold in grocery stores at 18 cents a pound. It is now averaging about 55 cents and is expected to be above 65 cents a pound within a‐few days.

The new increase, on top of a rise of 300 per cent in the last year and 30 per cent in the last month, appears inevitable as result of increases already announced by sugar refiners.

Sugar increases have outstripped—by far—the price rises this year of all other foods. Why?

It is a question that has stirred not only outcries from consumers, rationing by supermarkets and hoarding by some Shoppers; but also a series or Federal investigations.

Studies of skyrocketing prices and high refiner profits have been announced by both the Justice Department and the new Council on Wage and Price Stability. In addition, a two‐ year inquiry by a Federal grand july in San Francisco on possible price‐fixing by beet‐sugar and cane‐sugar refiners has closed with strong indications that several indictments will a soon be returned.

Sugar prices have soared as a result of several factors:

¶Since 1971, worldwide sugar Consumption has exceeded worldwide sugar production. No narrowing of the gap is expected for at least a year and consequently prices are expected to continue high.

¶Adverse weather conditions this year have sharply reduced the beet‐sugar crop in Europe Mild, dry conditions and an infectious plant disease, the “virus yellow,” have cut the latest harvest there 30 per cent, virtually assuring it will be insufficient to meet the current year’s demand. It appears unlikely that world sugar, production will catch up before October, 1975, when next year’s crop is harvested.

¶Turbtnent commodity speculation, mostly’ by Middle

Eastern countries, faced with a need to invest the revenues resulting from their quadrupled oil, prices has also, driven up prices. Algeria, for example, has bought about 3 million’ tons R sugar and Kuwait about 2 million within the last month—eqtiivalent to about one‐third of the American consumption and considerably more than their own domestic needs.

¶The, Soviet Union, traditionally, the world’s largest producer, and other Eastern Bloc countries have switched from exporter to importer status, after their own beet‐sugar crops failed. Moscow recently bought about 500,000 tons from the Philippines, Australia and Peru.

Least two major foreign sugar sources, the Philippines And Poland, recently suspended exports in an effort to stabilize their own supply situations.

Ironically, the present shortage, sugar economists say, arises from a hasty worldwide overexpansion of sugar produc, tion following the suspension of Cuban sugar sales to the United States in the nineteen sixties. As an aftermath to that supply glut, most sugar producing countries began to limit their growing through the rest of the decade.

Raw sugar prices rise and fall on the so‐called “world market,” based on the quantity of sugar traded freely. This year, free‐Market stock, estimated at 10 million to 12 million tons, has been seriously affected by the low crop.

A Leveraged Situation

Nick Stevenson, a partner in Stevenson, Montgomery & Clayton, a New York sugar broker, said recently, “Current apIpraisals show that over‐all con sumption at present rates will outstrip total 1974–1975 production by about 1.5 million tons, or close to 15 per cent of this residue. In a highly leveraged situation like sugar, inlured to unwieldy excess stocks for years on end, it would take only a small portion of such percentage to send prices soaring.”

Large price increases and widespread speculation have occurred before in sugar. In 1963, commodity‐market prices jumped in a five‐month period from 3 cents a pound to 13 cents.

On Dec. 31, the United States Sugar Act, which has been on the statute books since 1934, will expire, ending traditional agreements on prices and quotas. Unless quotas are continued or President Ford intervenes on prices, tariffs on both raw and refined sugar are expected to rise sharply, and sugar obtained abroad is likely to cost even more.

U.S. Supplies Half Needs

American production, totaling about 6 million tons annually, supplies about half the country’s needs of 11.5 million to 12 million tons a year. When world prices were low, the need to obtain half of the country’s supply abroad had little bearing on the United States price. But because world prices have risen from about 11.31 cents a pound in the commodity market in January for March delivery to 56½ to 57½ cents a pound yesterday, price inflation here has closely paralleled the worldwide

Some critics also charge that American sugar refiners are earning record profits partly by selling their’ products at high world sugar prices after buying raw sugar at sharply lower prices on the commodity exchanges.

Such action is not illegal, but it raises the question of whether such savings should have been passed along to consumers, rather than accumulated as corporate profits. Sugar company executives say their buying practices are “simply good business” and defend their increased profits as long overdue.

On the matter of industry profits, one prominent sugar executive, who asked not to be identified, acknowledged that sugar that had been bought at, lower prices on the commodity futures market had been responsible for a “good portion” of his industry’s rising profits.

Several sugar‐refinery executives, however, denied that the combination of buying lowpriced futures contracts and charging higher world prices had been responsible for their increased profits. They defended this practice, saying they were forced to price their products at “replacement” levels. A similar controversy arose concerning the repricing of low‐cost inventories of oil last year.

A groundswell of protest about the high price of sugar appears to be developing among food stores, bakers and other users of sugar.

The Great Atlantic and Pacific Tea Company recently, gave the managers of its 500 New York area stores the option of rationing sugar at one 5‐pound bag to a customer.

Supermarket sugar prices in New York and other cities vary, selling currently from $2.65 to about $3.00 for a 5‐pound bag. In some cases, sugar is being sold to induce shoppers to come in and buy other food, while in other cases it is being sold at a slight profit per bag. Connecticut bakers, protest ing that they were caught in a squeeze between rising sugar; prices and stiffening consumer resistance, held a special meeting last week in Wallingford to object to a rise’ in the wholesale price from $13 for a 100‐pound sack a year ago to $63 last week.

Protests Don’t Affect Prices

So far, these attempts to curtail sugar consumption have not affected prices, and refiners are maintaining their traditional buying and‐ pricing practices.

Since Oct.9, there have been five retail price increases, based on the raw‐sugar price at each Friday’s closing on the London Terminal Market and the New York Coffee and Sugar Exchange.

Profits of refiners have hit record levels this year. The Amstar Corporation, the country’s largest refiner; had 250 per cent higher profits‐in its September quarter. CPC International, Inc., the world’s largest, corn refiner, increased its net profit 19 per cent in the nine months ended June 30.

The Great Western United Corporation, after posting a 1,120 per cent gain in net income in its August quarter, said this week that rising sugar prices could provide earnings this fiscal year of $113‐million, or $54 a share, on contrast to a $1.38‐million loss in the previous fiscal year. Great Western is the nation’s largest beetsugar producer.

Commenting on his company’s high profits, Robert T. Quittmeyer, Amstar’s president, recently observed that refiner profits had been with the return on equity running under 10 per cent in three of the last five years, and finally last year reaching the average level of 15 per cent for all American manufacturing.

“The sugar business is catching up,” he said.

A study of four of the largest sugar refiners indicates that they will have the highest profitability this, year since World War II, with margins either within or slightly ahead of historical norms.

One of the main causes of sugar‐price inflation is the failure of supply to keep Up with world‐wide demand, which has been rising because world population is growing by about 75 million persons each year.

As the economies of developed and developing countries improve, principally those in the Middle East and Far East, consumption of desirable consumer goods, such as sugar, increases.

World sugar production, combining both cane‐sugar and beet‐sugar, is estimated at 80 million tons a year. Worldwide consumption, growing at an annual rate of about 3.75 per cent over the last decade, has increased from 55 million tons to an expected 82 million tons this year. From 1964 through 1970, production exceeded consumption by several million tons a year, but since 1971 this has changed and the outlook is for a continuing rise in prices or at best a stabilization at the current high prices.

It has been reported that a Federal grand jury may soon hand down indictments against both beet‐sugar and cane‐sugar companies for price fixing. The Holly Sugar Company has publicly stated that it believes it will be among those named if indictments are filed. Wednesday, Great Western said its sugar subsidiary might be among those indicted. Amstar on Oct. 23 said that it understood that the San Francisco field office of the Justice Department’s antitrust division had forwarded a report to Washihgton in which it recommended that a grand jury might be asked to indict a number of sugar companies.

“The Spreckels sugar division of [the] Amstar Corporation may be included among those companies,” Amstar said. “If this is the case, it is not appropriate to predict whether the Department of Justice will approve the recommendations of the field office, and if it does, whether any action will be taken by the grand jury.”

The Justice Department has said no recommendations have been made on indictments.

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