Sugar Jumps to 29-Year High as Brazil, India Supply Concerns Spur `Frenzy'

Raw sugar surged to a 29-year high as dry weather crimps output in Brazil, the world’s biggest producer, and India may cap exports to boost domestic supplies.

Output in Brazil’s Center South, the country’s biggest producing-region, tumbled 30 percent in the first half of October from a year earlier, industry association Unica said on Oct. 28. Stockpiles in India, the second-largest grower, are about 4 million metric tons, compared with the nation’s preferred level of 10 million tons, according to Rabobank International.

“Both Brazil and India are contributing to this frenzy,” said Judith Ganes-Chase, the president of J. Ganes Consulting LLC in Katonah, New York. “The prices will remain strong.”

Raw sugar for March delivery rose 0.67 cent, or 2.3 percent, to settle at 30.12 cents at 2:09 p.m. on ICE Futures U.S. in New York. Earlier, the price reached 30.64 cents, the highest level for a most-active contract since Jan. 15, 1981.

The commodity may climb to 35 cents by March should dry weather in Brazil persist amid increased demand from countries including China, said Michael McDougall, a senior vice president at Newedge USA. That would mark the highest level since November 1980.

Sugar has more than doubled since touching a 13-month low on May 7 on concern that adverse weather will reduce output in Brazil, Russia, China and Pakistan. The market needs supplies from India to meet a deficit, McDougall said.

‘Big Question’

“India is the big question overhanging the market,” said Jake Wetherall, a London-based trader at Rabobank International. “It looks like India is going to have a fairly good crop this year. It should be over 25 million tons for the first time in a few years. But the question is how much the government decides is going to be made available for export.”

Societe Generale SA raised price forecasts for raw and refined sugar, citing lower crop forecasts. Raw sugar in the fourth quarter will be 29.2 cents, up from a Sept. 17 estimate of 17 cents, Emmanuel Jayet, an analyst in Paris, said in a report. The estimate for white sugar was raised to $744 a ton from $515.

Refined-sugar futures for March delivery gained $12, or 1.6 percent, to $747 a ton on NYSE Liffe in London. Earlier, the price reached $755.90, the highest level since Jan. 26.

To contact the reporters on this story: Stephen Morris in London at smorris39@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.