Sugar Surges Most in Nine Months on Dim Outlook for Brazil Crop

Sugar jumped the most since October after an industry group said output would decline in Brazil, the world’s biggest grower.

Production in the Center South, Brazil’s largest growing area, may drop by as much as 1 million metrics in the current season compared with a year earlier, Unica said today. The sweetener has gained 73 percent in the past 12 months.

“People are getting extremely pessimistic about the Brazilian crop,” said Bruno Lima, a risk-management consultant at FCStone Group Inc. in Campinas, Brazil.

Raw sugar for October delivery climbed 1.84 cents, or 6.6 percent, to settle at 29.52 cents a pound at 2 p.m. on ICE Futures U.S. in New York, the biggest gain since Oct. 7.

“Funds are back in the market,” said Jeff Bauml, a senior vice president at R.J. O’Brien & Associates, a broker in New York. Prices will rise to 32 cents this month, he said.

Cane processing will total 535 million metric tons in the 2011-2012 season, or 40 million tons less than the previous estimate and below last year’s harvest of 557 million, C. Czarnikow Sugar Futures Ltd. said in a report yesterday. Goldman Sachs Group Inc. said today that the revised output estimate represents an “upside risk” to the bank’s three-month price forecast of 25 cents.

Production in the Center South region has declined almost 25 percent this season from a year earlier, according to Unica.

“Persistently weak crushing data out of Center South Brazil has supported prices as the market begins to price in a full-year cane crush below 540 million metric tons,” Morgan Stanley analyst Hussein Allidina wrote in a report dated yesterday.

In London, refined-sugar futures surged 5.5 percent to $745 a metric ton on NYSE Liffe. That’s the largest advance since Nov. 18.

To contact the reporters on this story: Isis Almeida in London at ialmeida3@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