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Fears for Indian supplies send sugar to fresh high

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Raw sugar soared more than 5% to a fresh 29-year price high on Thursday, dragging its white sugar peer to a record, as a report that India would go slow on exports added to fears for the squeeze on supplies.

The sweetener, which is traded in dollars in both New York and London, also benefited from the tumble in the currency which sent prices of a range of dollar-denominated assets soaring on Thursday, and following the move by the US to pump $600bn into its economy.

Many sugar buyers have been relying on India, the world's second-biggest producer of the sweetener, to keep export supplies running early next year, with the cane crushing season in top-ranked Brazil winding down this month.

While India has yet to make an announcement on its export policy, government sources on Thursday said that the country, recovering from two seasons of sugar deficit, would not permit wholesale shipments for now.

The country was to "go slow" until April on exports, which would "only be allowed in a calibrated manner" an unnamed official told Reuters.

'Impossible for the bears'

The comments added to fears of a supply squeeze also being stoked by fears that Brazil's sugar production may fall in 2011-12, dented by hangovers from dry weather as well as the credit crunch, which slowed investment in new mills and cane plantings.

"There are already concerns about Brazil's next crop," Thomas Kujawa at Sucden Financial said.

"It seems almost impossible for the bears to generate a story at the moment," he added.

Raw sugar for March jumped 5.5% to a 29-year high of 31.81 cents a pound in New York before easing to close at 31.66 cents.

White sugar for December hit $773.80 a tonne in London, the best for a near-term contract since the exchange began trading the sweetener in 1984, before easing to finish at $772.70 a tonne, up 3.4% on the day.

By Agrimoney.com

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