Sugar prices could soar to 30-year high

The top traders of sugar say the commodity is likely to surge to a 30-year high in the coming months, with all eyes on the pending Indian sugar crop output which is hoped will ease supply pressures.

Cargill, the US agribusiness group, and Sucres et Denrées of France told the Financial Times last week that very low global supplies of sugar over the coming months would create high volatility in the market and could produce sharp price jumps.

Jonathan Drake, head of sugar at Cargill, the largest trader of the sweetener, said he expected “a period of extreme volatility” due to “very significant imbalances in the market”.

Dry Brazilian weather, strong demand and expectations of an impending Q1 2011 trade flow deficit have driven the commodity to new highs.

And with global stocks very low and the projected 2010/11 production surplus looking vulnerable, Rabobank recently noted that “it is hard to argue that current prices are wildly overstating the situation.”

The high sugar prices and strong sales to other destinations have made the EU a less attractive destination for exporters, notes the USDA in a recent Gains report, with the result being a lowering of EU sugar imports by 0.5 million metric tonnes (MT) in MY 2009/2010 compared to MY 2008/09.