Sugar prices may touch 24-year high in 2006

Mumbai: Sugar prices may rise to a 24-year high in 2006 as Brazil, the world's biggest producer, uses more of its crop to make automotive fuels and demand for sweeteners rebounds in the US Raw sugar will average 14.74 cents a pound on the New York Board of Trade this year, up from 10.03 cents in 2005, based on the median estimate of 17 traders, analysts and buyers surveyed by Bloomberg. Prices probably will touch 18 cents or more, the highest since 1981, a majority of respondents said.

Brazil is converting more sugar into ethanol fuel after gasoline prices jumped to a record. A drought in Thailand, once the world's second-biggest exporter, and the prospect of reduced European Union exports are adding to the supply squeeze, raising costs for companies including cereal maker Kellogg Co and Coca-Cola Co, the world's largest producer of soft drinks. "The market's got legs, no question about it," said Edward Makin, chief executive officer of the Rogers Sugar Income Trust, a Montreal-based company that controls Canada's biggest sugar-refining group.

White, or refined, sugar prices, which averaged $279.09 a metric tonne in London last year, will trade between $300.50 and $532.80 this year and average $407.50, the Bloomberg survey showed. Prices jumped 37% last year. White sugar for March delivery rose as much as 1.1% today to $378 a tonne on the Liffe, and was trading at $377 a tonne in London.

While crude oil prices made headlines in 2005, New York sugar futures jumped 62%, second only to a 94% surge in natural gas. Sugar's gain accelerated late last year after the US increased imports because of damage to domestic crops and refineries from Hurricanes Katrina and Rita."The US is importing more because of the hurricanes, and that clearly is new-found consumption," said Mark Flegenheimer, president and chief executive officer of Michigan Sugar Co.

- Bloomberg
Financial Express
January 17, 2006