Dryness may overtake rain as the bigger threat to sugar supplies, Rabobank has warned, even as forecasts of wet weather helped prices to a fresh four-month high.

Traders blamed forecasts of more rain at Brazil's seaboard for a rise in raw sugar to touched 18.66 cents a pound in New York, the highest for a near-term contract since late March.

The wet weather poses to cause further hold-ups for the queues totalling more than 100 ships waiting to take on sugar in Brazil, the top exporter, by forcing ships to keep hatches shut, and so preventing loading.

"The big end customers, the Middle East, Far East and so on, all pretty much depend on Centre South Brazil for their sugar," Thomas Kujawa at Sucden Financial said, referring to the country's top sugar producing region.

"Buyers are having trouble getting the sugar out, and that is what people are reacting to."

Yield hits

However, further ahead, dry weather may dent supplies by accelerating the seasonal decline in the Brazilian harvest, Rabobank analyst Andy Duff warned.

"Although July has brought several days of very wet weather, there remains some concern that dry conditions this year may impact cane yields both towards the end of this season and next season," he said.

Furthermore, sugar beet crops in the European Union and Russia look set to fall short of early hopes, hurt by the drought which is slashing their farmers' grain yields.

"Both [countries] are large importers," Mr Duff said.

"Unless offset by improved production prospects elsewhere, these developments effectively increase the market's vulnerability to any shortfalls in Brazilian and Indian production."

The widespread expectations of a return of global sugar production to surplus, compared with demand, in 2010-11 was "vulnerable", he added.

Crop revisions

The comments came as the Russia Sugar Producers' Union lobby group warned that it might cut its forecast for domestic sugar output, blaming dry weather for slowing root development in beet crops.

In Brazil, Datagro, the sugar an ethanol analysis group, cut by 500,000 tonnes to 32.9m tonnes its forecast for sugar production in the Centre South, citing dry weather in May and June.

Plinio Nastari, the Datagro president, said: "The effects of the drought should start to become clearer from here out, especially with the late maturing cane that will be harvested from October through December. It is very underdeveloped."

However, higher plantings have are raising hopes for India, where Uttar Pradesh Sugar Mills on Friday forecast that sugar production in Uttar Pradesh, the country' top cane-growing state, would jump by 35% in 2010-11.

New York's October raw sugar contract closed down 0.2% at 18.31 cents a pound, with white sugar for the same month closing up $0.50 at $559.20 a tonne in London.