Sugar Futures Climb Amid Forecast Worldwide Deficit to Widen

Sugar futures climbed following a forecast that the worldwide shortfall will be higher than estimated amid ample demand.

Global production probably will trail demand by 8 million metric tons, more than forecast, because of lower output in Asia and Mexico, research company F.O. Licht said.

Sugar is “a fundamentally strong story,” said Hank King, the managing director of Trendphonic Futures Trading LLC in Chicago. “The numbers just keep coming out a little bit worse than before.”

Raw-sugar futures for March delivery rose 0.12 cent, or 0.4 percent, to 29.4 cents a pound on ICE Futures U.S. in New York.

A 2.1 percent price decline yesterday created “a really good opportunity for traders to buy,” said Dave Juarez, a market strategist in Chicago at Lind-Waldock, a unit of MF Global Holdings Ltd. “Sugar has really strong technicals and fundamentals.”

Futures have more than doubled in the past year as adverse weather curbed output in Brazil and India, the world’s largest producers. Yesterday, the price reached 30.4 cents, the highest level for a most-active contract since January 1981.

F.O. Licht revised its global production forecast for the 2009-2010 season that began in October to 157.4 million tons, more than 2 million tons lower than projected.

“The supply is tighter than previously expected,” Christoph Berg, a managing director based in Ratzeburg, Germany, said today at a conference in Manila.

Earlier, futures fell as much as 1.4 percent. Global output in the season that begins in October will probably rise, mainly driven by Brazil, and supplies will move toward a balance with demand, Berg said.

The cane harvest in Brazil, the world’s biggest grower, probably will rise to 50 million tons in 2010-2011 from an estimated 35 million tons in the current year because high prices have prompted farmers to plant more, F.O. Licht said.

“The foundation for the end of the sugar boom is currently being laid,” Berg said.

By Elizabeth Campbell
Bloomberg