Sugar Climbs to Two-Decade High as India May Increase Purchases

White sugar climbed to the highest price in at least two decades in London on speculation that India, Pakistan and other importers will purchase more of the sweetener as a supply deficit looms.

India, the world’s largest consumer, may import 2 million metric tons in the year ending Sept. 30, up from 225,000 tons in the previous 12 months, said R.L. Tamak, business head for sugar at the Indian unit of Olam International Ltd. White, or refined, sugar prices have more than doubled in the past year.

“Right now, few factories” have refining facilities during the off-season, Tamak said in a telephone interview. “White sugar has to be imported to meet the demand.”

White sugar for March delivery rose $6.10, or 0.8 percent, to $750 a ton on the Liffe exchange, the highest closing price since at least January 1989. The contract touched $760.10, the highest level in at least two decades, in intraday trading.

“I won’t allow a shortage in the local market,” Pakistani Prime Minister Syed Yousuf Raza Gilani told reporters in Islamabad today, indicating that the South Asian nation would speed up a plan to import sugar this year.

On ICE Futures U.S. in New York, raw sugar for March delivery rose 0.4 percent to 29.10 cents a pound at 5:45 p.m. London time. The contract pared a gain of as much as 1.6 percent to 29.45 cents, the highest for a most-active contract since January 1981.

Egypt, Indonesia and Philippines have also said they intend to import sugar to cool domestic prices, crimping supplies.

Stronger Dollar

Excess rains in Brazil and a weak monsoon in India hurt sugar-cane output from the world’s two biggest growers. Global demand for sugar will outpace supply by 13.5 million tons in the 2009-10 season, according to broker Czarnikow Group Ltd.

Most commodities fell as a stronger dollar dimmed the appeal of raw materials as an alternative investment. The dollar index, a gauge of the greenback’s performance against six major monies, rose as much as 1.2 percent, dragging down the 24-member S&P GSCI Index of raw materials by as much as 2.1 percent.

Among other agricultural commodities traded on Liffe, cocoa for March delivery slid 15 pounds, or 0.6 percent, to 2,303 pounds ($3,749) a ton. Robusta coffee for March delivery declined $28, or 2 percent, to $1,345 a ton. The percentage drop was the biggest since Nov. 10.

By M. Shankar
Bloomberg