Sugar Rallies to Highest Price Since 1981 on Tighter Supplies

Sugar futures jumped to the highest price since 1981 in New York on speculation that supplies will tighten as demand increases and output falls short of forecasts in Brazil and India, the biggest producers.

Prices rallied 19 percent in the past six sessions, and have more than doubled in the past year. Crops were damaged by a drought in India and too much moisture in Brazil, leading to the second straight year of a global production deficit that may send sugar even higher, said Richard Ilczyszyn, a senior market strategist with MF Global’s Lind-Waldock unit.

“Sugar is exploding,” Ilczyszyn said in Chicago. “The chart looks very, very strong.”

Raw-sugar futures for March delivery rose 0.49 cent, or 1.9 percent, to 26.43 cents a pound on ICE Futures U.S. in New York. Earlier, the most-active contract surged to 26.8 cents, the highest price since February 1981. A jump to 30 cents is “totally in the cards,” Ilczyszyn said.

Sugar output in India, the biggest grower after Brazil, fell to 1.7 million metric tons in the first two months of the season that began Oct. 1, down 9.6 percent from a year earlier, said an official at the Indian Sugar Mills Association. Production fell as drought hurt the cane crop and a price dispute delayed crushing, said the official, who asked not to be identified as the information was not public.

In Brazil, the top grower and exporter, production will increase less than previously forecast this year after rain in major cane-growing regions cut yields, the Agriculture Ministry said yesterday. Output is estimated at 34.6 million tons, down 5.7 percent from a September estimate, according to an e-mailed statement from Brazil’s Conab crop-forecasting agency.

By Elizabeth Campbell
Bloomberg