Raw sugar hits 30-year high, white sugar record peak

Monday, 8 November 2010 05:52 - - {{hitsCtrl.values.hits}}

London (ICE): raw sugar futures reached a fresh 30-year high and refined sugar a record peak for a second day on Friday due to tight export availability and a weak dollar following a stimulus package by the Federal Reserve.

“With the weakness of the dollar, people are scrambling to put money into commodities, including sugar,” said Jake Wetherall, a soft commodities trader with Rabobank.

The Fed on Wednesday launched a fresh effort to support a struggling U.S. economy, committing to buy $600 billion in government bonds, and the dollar fell against a basket of currencies.

A weak dollar can make commodities that are dealt in the greenback more attractive to investors. The Fed’s easing also could lower interest rates and encourage investors to invest in riskier sectors such as commodities.

Dealers said sugar held additional attraction for investors of a bullish fundamental story due to tight supplies, low inventories and resilient demand.

ICE front-month raw sugar touched a record high of 32.30 cents a lb and later stood at 31.88 cents, up 0.22 cent, at 0946 GMT.

Futures last week vaulted above the psychological 30 cents a lb level, having more than doubled in price since May because of lower-than-expected output in key producers due to adverse weather.

Sugar futures are supported by tight export availability from top producers Brazil and India, expectations that global stocks will remain low over the next 12 months and uncertainty over whether India will export enough sugar to help make up for lower-than-expected Brazilian output.

The market is focused on an expected decision by India, the world’s number 2 producer after Brazil, later this month on whether to allow so-called “open general licence” exports.

Liffe front-month white sugar touched a record high of $783.90 per tonne and then lost some ground to stand at $777.70, up $5.0, at 0947 GMT.

Dealers say India is likely to approve sugar exports incrementally. Indian industry expects exports of some 2.5-3.5 million tonnes in 2010/11 and has lobbied authorities to approve 2 million tonnes of OGL exports, analysts say.Some dealers say the raw sugar futures market has potential to rise to 35-40 cents a lb in the medium term, but others say it risks being overbought due to a lack of physical off-take at current high prices.

The latest round of buying affirmed the overwhelmingly bullish sentiment at London Sugar Week last week, when dealers said they believed a test of the 30-year peak was inevitable.