Sugar extended its surge to the highest in more than a decade in London on mounting worries about tight supplies, threatening to maintain pressure on global food inflation.
(Bloomberg) — Sugar extended its surge to the highest in more than a decade in London on mounting worries about tight supplies, threatening to maintain pressure on global food inflation.
White-sugar futures jumped as much 4.3% on Tuesday, touching the highest since 2011. Prices of the sweetener have jumped on prospects for limited exports out of key shipper India and lackluster supplies from other countries including Pakistan and Thailand.
Following downward production revisions in major countries, “the sugar market is really tight,” said Francois Thaury, an analyst at Paris-based adviser Agritel.
A lack of deliverable sugar ahead of the expiry on Friday of the white-sugar contract for May is driving prices higher. The number of contracts to be closed, known as the open interest, points to a delivery above 880,000 tons, according to John Stansfield, a senior sugar analyst at DNEXT Intelligence. “That’s massive,” he said. Those holding short positions “don’t have the physical sugar to tender.”
At the same time, fund buying is fueling prices, according to Claudiu Covrig of Covrig Analytics. “Funds might soon become the market pilots, while the rest will remain just passengers.”
Higher retail prices of sugar in India are also adding to bets that the government won’t permit additional exports this season, pressuring the market even further, Thaury said.
There have also been concerns that oil’s recent push higher may spur Brazilian and Indian mills to divert more cane to making ethanol. Millers in those countries can decide whether to make more sugar or biofuel, depending on what’s more attractive.
Increasing sugar prices are adding to the expense of making products like confectionery and baked goods at a time when energy, fuel and labor costs have also risen. The rally has already worsened the impact of inflation in the UK, with shoppers paying more for things like sweets and soft drinks.
A large crop in Brazil for the upcoming season could help ease the market tightness. “Brazilian volumes are deeply needed, but they are not there yet,” Covrig said.
Read More: Sugar Is Getting Even Pricier, Threatening More Food Inflation
White sugar was up 2.3% at $676.80 a ton as of 2:48 p.m. in London, advancing for a fourth session. Raw sugar gained as much as 2.3% in New York, touching the highest since 2016.
In other soft commodities, arabica coffee rose 2.9% and robusta 2.3%.
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