The price of raw sugar soared to its highest level in almost 30 years on Friday, driven by investors worried about tight supplies and stout global demand for the sweetener.
A prime catalyst for the relentless rally in sugar is the worst monsoon in 40 years in No. 1 consumer India, forcing the teeming South Asian nation to book large imports of sugar ahead of its annual festival season this year.
New York’s October raw sugar contract jumped 1.03 cents, a rise of more than 4.5 per cent on the day, to end at 23.52 cents per lb, the loftiest finish for the sweetener since early in 1981.
London’s October white sugar contract climbed $14.80, up 2.65 per cent, to conclude at $573.10 per tonne.
‘People are talking 30 cents and we’re not that far away,’ Jack Scoville, vice president and senior analyst for brokers The Price Futures Group, said.
Alex Oliveira, senior sugar analyst for Newedge USA, said the momentum is definitely toward ever higher ground and a target of 30 cents is within sight.
Lars Steffensen, managing director of UK-based commodities fund Ebullio Capital Management, said investment funds have poured wholesale into sectors like sugar.
‘With all the money that’s been thrown at the commodities sector at the moment some of these prices are skewed to ridiculous degrees and sugar is one of them,’ he explained.
Sugar has trumped jitters over a global economic recovery because several countries may need to import the sweetener over the next few months.
India is leading the pack on demand.
The country is going to harvest a poor cane crop because of a monsoon that some weather and climate forecasters believed was disrupted by the formation of an El Nino weather anomaly in the equatorial Pacific Ocean.
Indian 2009/10 sugar production is seen dropping to 14 million to 15 million tonnes, while consumption stands at over 22 million tonnes.
Some analysts say that initial estimates India would import 2.5 million to 3.0 million tonnes of sugar in the 2009/10 season could probably balloon to 5.0 million tonnes, or more.
There is also an ever lengthening lineup of countries booking or about to place orders for sugar.
They include Pakistan, which is buying 300,000 tonnes in 2009. China’s poor weather may create a shortage of 2.0 million tonnes, Egypt is tendering for 100,000 tonnes and there are shortfalls in Iran and Iraq as well.
The US may soon be buying sugar too as it faces a shortage in the spring of 2010. Analysts now expect the US to order around 800,000 tonnes of sugar by that time.
Large sugar exports are jammed in Brazil’s ports as they toil close to full capacity, which analysts there said could delay future shipments. Brazil is the world’s leading producer and exporter of sugar.
Cocoa slumps, coffee firmer
Cocoa futures were softer as a result of follow-through sales in quiet dealings.
The New York market has stumbled after hitting the psychological $3,000-a-tonne mark earlier in the week.
Steffensen said New York cocoa values could fall ‘back to $2,500 and then it will start all over again.’
New York’s December cocoa contract fell $22 to close at $2,799 per tonne. On Tuesday, it closed at $3,008 in the loftiest finish since August 2008.
London’s December cocoa contract lost 13 pounds to conclude at 1,825 pounds a tonne.
Coffee futures were buoyed by modest short-covering after recent selling deflated the market.
London’s November robusta coffee contract rose $9 to settle at $1,411 a tonne. New York’s December arabica contract added 0.95 cent to end at $1.223 a lb (0.55 kg).
Resources: Reuters