New York sugar futures "look like" hitting 20 cents a pound in August for the first time since April 1981, a report from BNP Paribas Fortis, the Franco-Belgian bank, has said.

The last stage of the crop's 2009 rally, from a year start of 11.81 cents a pound, would be fuelled by the market getting "caught between a rock and a hard place", the note said, citing weak Indian production and a "very real chance" of a rain-spoiled harvest in Brazil.

"Sugar could be about to enter its own perfect storm," the bank said.

The report came as Indian extended beyond the end of this month a period of duty-free raw sugar imports for mills, in the face of a continuing squeeze on supplies.

The country also extended the concession to the private trade, and to some white sugar purchases. 

Too dry

Hopes for India's sugar production, which slumped 40% last year thanks to a shift by farmers from cane to grain, have been dented by the worst start to the monsoon in 80 years, putting plantings at risk.

The country, which became a net importer last year, would "inevitably" remain reliant on foreign purchases, which could reach 5m tonnes "if farmers really don't flock back to sugar cane".

"Some estimates now see India important more than 3m tonnes in 2009-10, but that might be rather conservative," the report said.

Too wet 

Meanwhile, wet weather may hamper efforts by Brazil, the world's biggest sugar producer, to fill the gap.

Weather forecasts are predicting a wetter-than-average spring and summer period (September to February) in many parts of Brazil, following on from a rainy winter which has already disrupted crushing operations.

Besides hindering harvesting, wet weather also tends to produce lower sugar yields.

"The ideal growing conditions are those in which the crop comes under a degree of stress, with rainfall only every 25-30 days for period of around four months, in order to concentrate sucrose," the bank said.

The comments follow a warning from Unica, the Brazilian cane industry body, that excessive rain forecast for the rest of 2009 threatened plans for a big rise in sugar output.

New York raw sugar for October closed down 0.14 cents at 18.56 cents a pound in New York.

London white sugar for October ended $2.1 lower at $491.7 a tonne.