Sweet Talk for Sugar Producers

"The New York Sugar Dinner is one of the most prestigious, social and business events in the world sugar calendar. It brings together players from the most relevant areas of the business - beet and cane growers, processors, refiners, brokers and traders from all continents."

And... this sweet gala took place in the Big Apple last week.

According to dealers that attended, the mood this year for the sugar commodity is bullish, a direct result of the global credit situation and supply and demand issues.

Sugar mills in Brazil, the world's top producer and exporter of sugar, are experiencing financial difficulties... a consequence of the global credit situation.

The result: price increases for sugar.

Supply and demand issue discussions focused around India, the world's largest sugar consumer and major producer.

Apparently this past year, India's consumption increased to 23 million tons after yielding a crop of only 15 million tons, clearly not enough for domestic demand. The previous year's crop was nearly double with 26.5 million tons.

This changed India from exporter to importer, draining global supply and hence, driving up sugar prices.

Also, the International Sugar Organization (ISO) escalated their prediction of the 2008/09 global sugar deficit to 7.5-7.8 million tons this week. The estimate is up from a prior calculation of a 4.3 million ton deficiency.

In addition, sugar futures hit a near-three year high of 16.03 cents per pound on Tuesday.

Sterling Smith, senior analyst for brokers FuturesOne in Chicago, said,

"there may be a pull-back in raw sugar prices to 14.75-14.25 cents per lb. as the market retreats from its peak, but that the sweetener could regroup and march toward 15 and possibly 16 cents per lb in coming months."

Jonathan Kingsman, dinner attendee and manager of Kingsman SA, told Reuters,

"Price is the best fertiliser... These high prices for sugar are giving extremely high returns for producers around the world and they will be looking to expand."

Perhaps this increased revenue will enable growers to expand their crops and prevent a major price increase in the upcoming season. It will be interesting to see how the supply and demand relationship levels out in the future.

In the meantime, it seems like a good idea to stock up on sugar, as this commodity is likely to become pricier.