Sugar prices regained some of their mojo after Kingsman raised its estimate for the world's production shortfall this year and said that inventories would be "extremely tight" heading into 2011.

The sugar consultancy forecast that global sugar output would return to surplus in the 2010-11 marketing year, which starts in April, as producers responded to the incentive of prices which have set records in London, and hit their highest in 30 years in New York.

However, Kingsman said that the forecast - its first for 2010-11 - of a surplus of 3.99m tonnes may prove optimistic if rains continue in Brazil's Centre-South district, which is responsible for 20% of world production and has suffered significant harvesting delays and yield drops thanks to rainfall.

Furthermore, the consultancy said that the year would begin with a bigger rundown in inventories than had been thought, raising its estimate for the shortfall in production in 2009-10 by 3.62m tonnes to 11.92m tonnes.

Separately, FO Licht, the analysis group, cut by 3m tonnes to 156.9m tonnes its forecast for global sugar production in 2009-10, citing disappointing output in most major producers bar the European Union.

BRIC factor 

Tom McNeill, head of research at Kingsman, said: "It appears that global stocks will remain extremely tight into 2011, given the extraordinarily tight situation in the current market."

The group's boss, Jonathan Kingsman, said it wouldn't be until Brazil's harvest next year that "importers may be able to relax".

Besides the supply hiccups, the market would also be squeezed by a recovery in demand spurred by economic revival.

"We expect consumption to get back on track as economies grow in the BRIC countries," the consultancy said.

Brazil, India and China are, besides being the world's three-biggest sugar producers, major consumers too, while Russia produces about half its needs of about 6m tonnes a year.

Prices bounce 

The comments helped revive sugar prices which, in New York, fell by 12.5% last week as the economic concerns evident in many other markets also dented values of many soft commodities.

"We affirm our positive view on sugar," analysts at Commerzbank said, noting that Kingsman's decision to raise its estimate of the world's 2009-10 sugar deficit followed similar moves by sugar broker Czarnikow and research group FO Licht.

White sugar for March delivery closed 1.9% higher at $738.00 a tonne in London, with raw sugar for March gaining 1.6% to 26.60 cents a pound in New York.