Over the last few months, we have seen a stellar rally in sugar prices but a collapse in coffee, until today. The Indian government lowered its sugar cane production estimate by more than 5% from earlier projections last summer. This has helped create a squeeze in the sugar market as tight supplies have been the rule. India is the world's #1 sugar exporter. 

Another bullish sign in sugar was that this market was acting well even in the face of collapsing sugar prices. Typically, when crude oil is above $80-$90 a barrel, Brazil's processors make more ethanol from their sugar cane harvest and less actual sugar. 

April is a critical time for Brazil's sugar harvest. As you can see above normal rainfall will be falling during the next two weeks, just as their harvest begins. The charts look positive for sugar, but not so for coffee… until today.  Coffee prices collapsed, in part, due to drier weather the last week in Brazil. You can see from ClimatePredict (my in-house analytic forecast tool), the dry weather that extended from February to March. Dry weather is needed ahead of their harvest.

Last week, below $1.70 in coffee futures, I advised my newsletter subscribers that everyone was now short and that a major flooding event may soon turn this market around. While an upside break-out in the Brazil Real has also helped this market, there is no room for error for any weather concerns in Brazil again.  I was bearish coffee for the last few weeks. But will this really be a major factor in coffee and how do you trade this? We think our newsletters will explain this. Notice the % of normal rainfall some 200-300% of normal in the next 2 weeks in the heart of Brazil’s sugar cane and coffee regions.

Source - https://www.barchart.com