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August 10 - Tidbits

Monday, August 10, 2009, 3:45 PM
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Sugar Rallies 40% in Options Pointing to ‘81 Peak

Aug. 10 (Bloomberg) -- Damaged crops from India to Brazil mean the world won’t have enough sugar for a second straight year.

Global demand will exceed output by as much as 5 million metric tons in the year through September 2010, leading to a record two-year shortfall, according to the International Sugar Organization in London. Parts of Brazil, the largest grower, are drenched by rainfall four times more than normal and too wet to harvest. India, the biggest consumer, had its driest June in 83 years and may double imports.

The number of options to buy sugar for delivery in March at 30 cents a pound, 44 percent higher than the Aug. 7 price in New York, has jumped more than 18-fold in four months. The rally is boosting expenses for food makers from Kellogg Co. to Kraft Foods Inc. and increasing profits for Cosan SA Industria e Comercio, the largest cane processor.

“I haven’t seen sugar fundamentals being so severely unbalanced in my time,” said Adam Leetham, the Gurgaon, India- based director of Czarnikow Group who has been tracking the domestic industry since 1994. “It’s not just India. You see fundamental deficits in a number of large markets. It certainly looks like we will enter uncharted territory.”

 

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