Sugar hits 29-Year high

Jan 26, 2010 News

Strong demand for sugar catapulted prices above 30 cents a pound in intraday trading to a 29-year high, according to the Wall Street Journal yesterday.
The tight global supply situation was illustrated by news yesterday that Indonesia expected a 530,976-metric-ton production shortfall at the end of April, which will be met largely through imports totaling 500,000 tons. Efforts to import white sugar have been stymied by soaring world prices and a lack of sellers.
Meantime, Chinese officials on Sunday said that the country needs to raise acreage, yield and total sugar output. The country set an output target of 17 million tons of sugar by 2015.
Traders said the Indonesian and Chinese developments weren’t a surprise but they add to the bullish sentiment in the market. Higher crude-oil prices also provided support for sugar, a broker said.
“There isn’t really any supply in the market right now and there won’t be any for another six to eight weeks” when the South American harvest hits the market, said James Cordier, analyst and president of Liberty Trading Group in Tampa, Fla.
Most active March sugar on ICE Futures U.S. topped out at 30.10 cents a pound, the highest level since January 1981. The contract settled at 29.80 cents, up 3.5%, after traders booked profits.
Lower-than-expected output in top producers Brazil and India, combined with increased demand from Indonesia, Pakistan, Egypt and other nations, is expected to reinforce the market’s bullish sentiment.
Brazil is the largest sugar cane grower in the world, but a wet growing season and rain during the harvest has led to quality issues and reduced crop estimates.
India, the world’s largest sugar consumer and second-largest producer, turned from a net exporter to net importer after an erratic monsoon season left crops short of water.
The International Sugar Organization forecasts a global sugar deficit of 7.2 million tons for the 2009-10 season, as demand outstrips supply.
Even the Florida crop will be smaller than expected due to the January cold snap that damaged sugar cane. Florida accounts for 20% to 25% of total U.S. cane production.