Sugar was among the best performing soft commodities this week, with March 2011 contracts closing at 27.33 cents a pound on Wednesday, representing a 5.6% gain over the period.
The rise in the price of sugar is partly due to poor weather conditions in some of the world’s biggest producers. Sugar prices have gained nearly 90% from this year’s low of 14.56 cents a pound as droughts in Brazil, the world’s biggest producer of sugar, and disruptive weather conditions in India, the world’s second-biggest producer, and Australia, the third largest exporter, led investors to speculate that sugar supplies will be tight next year. Production in the Indian state of Maharashtra, the country’s largest producer of refined sugar, fell 29% on the year from 1 October to 20 November, as heavy rains slowed the harvest. Rumours of a cap on Indian exports of the commodity are also pushing up sugar prices. Meanwhile, wet weather conditions owing to the La Nina event has slashed Australia’s production forecast to the lowest level in nearly two decades, according to Canegrowers. Australia, the third-largest exporter, has also lifted the price of sugar, as exports from Queensland Sugar Ltd, which handles more than 90% of the country’s exports, could drop 14% to 2.5 million metric tons for the year ending 30 June if wet weather conditions persist, warned Neil Taylor, the company ‘s CEO . Total crop could be between 3.5-4 million tons, he added. That would be the lowest level since 1991-92.. On 17 November the International Sugar Organization said that global sugar supplies will exceed demand by 1.3 million tons for the 2010-11 crop, less than half the previous estimate.