Sugar prices rose nearly 4% to a five-month high after Kingsman became the second market watcher in two days to cut hopes for the surplus in world production of the sweetener.

The Swiss-based analysis group cut by 32% to 3.52m tonnes its forecast for the global sugar surplus in 2010-11, after two seasons of production deficits.

The downgrade - which Kingsman blamed on "poor weather" in countries including Brazil, the top producer, Pakistan, Russia and South Africa - fell short of that on Tuesday by sugar merchant Czarnikow, which said that world  sugar production looked set to match demand, rather than beat it.

Nonetheless, with the world sugar deficit estimated at about 5m tonnes in 2009-10, Kingsman boss Jonathan Kingsman warned that world sugar stocks were "still very tight".

The return of sugar prices to 20 cents a pound in New York two weeks ago reflected "ongoing strong demand for the product", he added.

New York raw sugar for October delivery closed 3.8% higher at 20.49 cents a pound, the highest for a spot contract since March. In London, white sugar for October finished 0.2% higher at $578.90 a tonne.

Weather 'havoc' 

Mr Kingsman's comments came at a conference in India, the second-ranked sugar producer and top consumer, where crop hopes have been raised by a rise in sowings and satisfactory monsoon rains.

Some forecasters were now predicting a rebound in Indian production to nearly 30m tonnes in 2010-11, from 18.8m tonnes the previous year, he said, noting "apparently sufficient confidence in supplies to allow exports to the world market".

However, cane areas in Brazil have "been very dry recently", he said, flagging the damage caused by last year's El Nino weather pattern, associated with warm Pacific water temperatures, and their current cool down, linked to La Nina conditions.

"The transition from El Nino to La Nina conditions in 2010 has played havoc with sugar production prospects in many countries," Mr Kingsman said

On a roll 

Brazil has also been marked by wet weather in many coastal areas, disrupting the loading of sugar onto vessels, which must keep holds closed during wet to avoid spoiling their cargo, and adding to the long delays ships face to queue up.

While Brazilian officials have said they expected port congestion to ease by October, "the weather has been unusual of late, to say the least", Thomas Kujawa at Sucden Financial said.

He also noted signs of a so-called "roll" in white sugar, in which investors switch positions from a near-term contract, often as expiry approaches, to a further-away lot. The premium of London's October contract over the December lot had weakened to below $50 a tonne.

In raw sugar, he also flagged the outperformance of later lots, with New York's May 2011 contract on Tuesday succeeding in hitting its highest since March.