Nov. 20 (Bloomberg) -- Prices for sugar, the second-best performing commodity in the past year, will remain firm as global production lags behind demand, said Queensland Sugar Ltd., Australia’s biggest exporter.

“We’ve had a strong run,” Alan Winney, chairman of the company that ships 95 percent of the nation’s raw sugar exports, said today in an interview with Bloomberg Television. “We are going to have prices that will stay fairly firm for the next 12, maybe 18 months.”

Sugar prices are up 98 percent in the past year, making it the No. 2 commodity as measured by the Standard & Poor’s GSCI Commodity Index, trailing only silver. Prices rallied as adverse weather in Brazil and India constrained output, extending a global production deficit into a second year.

“High prices will encourage increased production, but there is limited capability to increase production in the short term,” Winney said in Melbourne.

Raw sugar futures for March delivery fell 2.4 percent to 22.74 cents a pound on ICE Futures U.S. in New York when last traded yesterday. Prices jumped to a 28-year high in September because of weather disruptions to crops in Brazil and India, the world’s top two growers.

Price gains are being driven by increased demand, particularly in Asia, wet weather in Brazil and a weak monsoon in India, Winney said.

“There is strong growth throughout those high-growing economies in Asia and in other parts of the world,” he said.

Narrowing Deficit

Global sugar consumption will climb 2.6 percent to 165.4 million metric tons in the season that began Oct. 1, exceeding production for a second year, German researcher F.O. Licht said on Nov. 17.

The supply deficit is likely to narrow to 6 million tons, from 10.7 million tons in 2008-2009, Licht said. It also forecast stocks as a percentage of consumption may drop to about 35 percent by the end of September 2010, the lowest ratio in at least a decade.

“There’s minimal production increases in five or six countries, but not enough to turn the world market from the current 11 million-ton deficit to anything at all that looks like a surplus,” Queensland Sugar’s Winney said. “We are still looking like a 6 million-ton deficit for the next 12 months.”

Brazil is forecast to be world’s top sugar exporter in the 2009-2010 marketing year, followed by Thailand and Australia, according to the U.S. Department of Agriculture.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

Last Updated: November 19, 2009 20:44 EST