How's Your Sugar High?

Published on: 09:27AM Nov 04, 2010

The Wall Street Journal reported today that the sugar prices are nearing a 30 year high.  The benchmark March sugar contract settled at 30.15 per pound yesterday.  That was the highest close since January 14, 1981. 

There was a rally earlier in the year that got close to the same price, however, that rally was based more on speculators and not fundamentals.  This rally appears to be based almost solely on fundamentals.  Brazil, the world's largest sugar producer, is enduring weather problems that will affect the sugar crop.

Global stocks have been decreasing steadily for two years and some experts think the actual stocks will be below the 20 million metric tons which is less than half the level from two years ago.

India is the crucial country in this whole equation.  It is the world's largest sugar consumer and they anticipate a bumper crop this year that will allow about 2 million metric tons available for export.  Traders expect India to announce export quotas of up to 2.5 million tons this month.  Anything materially less than this will send prices spiraling higher.

We already see how cotton prices have dramatically increased with new record highs set this week.  Will sugar follow the trend and set a new "sugar high".