Sugar Rises to Two-Decade High in London on Deficit Speculation

White sugar rose for a fifth day in London to the highest level in at least two decades on speculation a global supply shortfall will buoy demand and sustain prices.

India, the world’s biggest consumer, is buying sugar for a second year after the weakest monsoon since 1972 worsened a supply deficit. The price for immediate delivery at Vashi, the country’s biggest wholesale market for the commodity, advanced to the highest level since at least July 2005, data compiled by Bloomberg showed.

“The gains in Vashi signal one thing,” Amol Tilak, an analyst at Mumbai-based Kotak Commodity Services Ltd., said by phone. “There’s a stock-crunch situation in India, and prices are expected to remain firm for at least one year.”

White, or refined, sugar for March delivery rose as much as $7.30, or 1 percent, to $729 a metric ton on the Liffe exchange, the highest since at least 1989. The contract was at $728.90 at 11:39 a.m. local time. Prices more than doubled last year after excess rains in Brazil and a weak monsoon in India hurt sugar- cane output in the world’s two biggest growers.

Prices at Vashi climbed 3.5 percent to 3,869.15 rupees ($83.66) per 100 kilograms (220.5 pounds). The sweetener at the market is “priced to bridge the gap between the imported price and the domestic price,” Kotak’s Tilak said.

Pakistan, Indonesia

Global sugar output is forecast to fall short of demand by 13.5 million tons in the current 2009-10 season, according to London-based broker Czarnikow Group Ltd. Pakistan last week announced plans to import 500,000 tons of refined sugar by June. Indonesia yesterday said it reached an agreement to buy 48,000 tons of white sugar from Thailand.

“In addition to general investor interest, sugar prices continue to be supported by the prevailing supply shortage,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, wrote in a note e-mailed today.

Raw sugar for March delivery climbed 1.7 percent to 28.09 cents a pound on ICE Futures U.S. in New York. The contract rose as much as 4.6 percent to 28.90 cents, the highest since 1981.

Among other agricultural commodities traded on Liffe, cocoa for March delivery rose 1 percent to 2,244 pounds ($3,594) a ton. Prices jumped 26 percent last year. Robusta coffee for March delivery gained 0.4 percent to $1,370 a ton, rising for a fourth day.

Bloomberg