Sugar to Climb Near 24-Year High

by Dave Latin America

No matter what happens in the global economy, sugar demand is about to top production for the first time since 2006, the year prices reached a 24-year peak.

India, the second-biggest grower, will reduce supplies 16 percent next year, shifting to more profitable crops. Brazil, the largest producer, expects to use 57 percent of its cane for ethanol this year, up from 54 percent. Refiners in Europe will process 15 percent less because a 2004 trade ruling bars growers from exporting surpluses.

“The fundamentals for next year are better than in the last 12 months and are the best for market values in the last three seasons,” said Sergey Gudoshnikov, a senior economist for the London-based International Sugar Organization, which represents countries producing 82 percent of the world’s sugar.

The shortfall may make sugar one of the only commodities to continue rallying even as the slowing global economy reduces demand for raw materials from aluminum to oil. Sugar use isn’t affected by price swings in developed countries, while people are eating more sweeteners in China and India, the largest consumer, according to London-based ED&F Man Holdings Ltd.

Sugar on ICE Futures U.S. in New York may jump 28 percent to 18 cents a pound next year from 14.06 cents on Sept. 12, said analyst Jonathan Kingsman in Lausanne, Switzerland, whose firm Kingsman SA advises banks, hedge funds and Fortune 500 companies on commodity purchases. Kona Haque, a commodity strategist at Macquarie Bank Ltd. in London, said the price may reach 20 cents, and Jean Bourlot, a managing director and head of agricultural trading at Morgan Stanley, said it may double in 18 months.

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