Our Secret Inflation Barometer Sugar, Building a Base

July 2, 2024

Mish's Daily

By Mish Schneider

Mother Nature can be such a B@*^H!

On March 6,2024 I wrote a Daily on sugar and inflation.

The biggest takeaway is

We will know about inflation by watching:

  1. Silver-and if it can begin to outperform gold-CHECK
  2. Oil, if spikes over $80 a barrel-CHECK
  3. Sugar, if even with increased production begins to move up back over 23 cents a pound-NOT YET
  4. The dollar fails 103 and selling pressure returns. Rumor has it through Russia that BRICS is working to create an independent payment system based on digital currencies and blockchain NO

Focusing on sugar

Recent weather conditions like:

  1. Below-normal rainfall in Brazil -dry weather will reduce sugarcane yields and curb Brazil's sugar output
  2. India's agricultural agency reported a fungus crop (red rot) was spreading through a key sugar-growing region.
  3. India’s below-normal monsoon rain may curb sugar output-current monsoon season down -11% from the long-term average.

Then add some concerning geopolitics:

  1. Protectionism is rising as countries look to protect their domestic markets.
  2. Developing nations, already grappling with food shortages and inflation, are particularly affected. Import-dependent countries, such as many in sub-Saharan Africa, remain vulnerable. For instance, Nigeria, which buys 98% of its raw sugar from other countries, faces challenges due to rising prices
  3. Bolivia has been grappling with economic turmoil, which could directly and indirectly impact sugar prices-Bolivia’s economic woes may indirectly contribute to global sugar price fluctuations, especially if it disrupts trade or production.
  1. Same is true for Kenya, currently in turmoil

The futures chart shows the clear support at the 50-DMA after it consolidated and formed a base over 20.00.

Next hurdle is 22.00.

The CANE chart also shows a decent bounce once the 50-DMA cleared and the price of 12.00 (risk point).

CANE is outperforming the benchmark for the first time in a while.

Real Motion shows us momentum inclining with the clearance of the Bollinger Band.

Resistance is higher at 13.30 or the 200-DMA.

While we keep hearing about disinflation, I keep seeing signs of nuanced inflation.

Whether sugar is our ultimate X factor or not, it is super reliable to watch because it checks all the boxes

  1. Weather
  2. Geopolitics
  3. Social unrest
  4. Supply chain and labor

I will be taking the rest of the week off.

The next Daily will be published July 8th with an Outlook available this coming Sunday.

Have a very happy July 4th!


Educational purposes only, not official trading advice.

For more detailed trading information about our blended models, tools, and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

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Mish in the Media-Want to see more?
All clips here

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Coming Up:

July 9 StockchartsTV

July 16 Wealth 365

August 2 Yahoo Finance

Weekly: Business First AM, stockpick.app


ETF Summary

S&P 500 (SPY) 5400 support 5600 resistance

Russell 2000 (IWM) 197-202 tightest range to watch

Dow (DIA) 40k resistance

Nasdaq (QQQ) Sideways but still looking solid

Regional banks (KRE) Watching the range 45-50 CAREFULLY

Semiconductors (SMH) 260 pivotal support

Transportation (IYT) 67 hurdle to clear 64 support to hold

Biotechnology (IBB) 140 pivotal resistance

Retail (XRT) 200 week moving average support at 72.75. Needs to recapture 74.50

iShares iBoxx Hi Yd Cor Bond ETF (HYG) 76.50 key support

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