Sugar markets rediscovered their mojo on Wednesday, despite the spectre of fund selling, as a series of importing countries unveiled initiatives aimed at shoring up supplies.

In London, white sugar for March gained 0.8% to $731.00 a tonne. In New York, raw sugar gained nearly 2% to 27.88 cents a pound, taking it to 1 cent or so from its 28-year high.

The renewed rises came as Pakistan revealed it would for scrap import taxes for the private sector on 700,000 tonnes of white sugar to encourage supplies and keep a lid on soaring prices.

It has also tasked the state-run Trading Corporation of Pakistan with importing 500,000 tonnes of white sugar by the end of March, with tenders for 300,000 tonnes already issued.

Indian concession 

Separately, the Philippines said it planned to import up to 150,000 tonnes of raw sugar between April and July – its first foreign purchases since 2006.

And India extended by nine months to the end of 2010 a period of duty-free imports of white sugar to help curb food inflation which hit 19.8% in mid-December.

The shortage of sugar in India, the world's biggest consumer, thanks in the main to weak domestic production has been one of the key causes of a jump in sugar prices to a record in London and their highest since the 1980s in New York.

The other main driver has been weaker-than-expected output in Brazil, the top-ranked producer, where, to boost supply, mills have remained open during what is normally a close period.

And, to curb demand, the government has lowered to 20%, from 25%, the mandated level of ethanol in pump petrol. Ethanol is, in Brazil, manufactured overwhelmingly from sugar.

'Determined selling'

The initiatives from sugar exporters were a reminder of the inherent demand for sugar after a relatively slow period for import announcements, traders said.

"They don't change the fundamentals of the global balance sheet for sugar," a London analyst told Agrimoney.com, adding that New York prices looked poised to hit 30 cents a pound.

"But they do show that demand is still waiting around the corner."

At Sucden Financial Sugar, Nick Penney highlighted the sweetener's rebound "in the teeth of determined selling by funds", who are undertaking an annual asset rebalancing.

This process cuts the weightings of 2009's star performers, such as sugar, back to funds' base allocation levels, and has been cited as a reason behind pressure on prices since late last week.

"We reiterate our view that, after this recent correction and with index fund reweighting supposedly ending this week, values will continue to improve in the short-medium term," Mr Penney said.