Kamuela, Hawaii, Aug 5 - Raw sugar prices are seen surging to an average of 16.5 cents per lb in 2009 and may hit 17 cents in 2010 because supplies are going to tighten while imports should rise in China, an industry official said.
Craig Ruffalo, vice president of sweetener analysis firm McKeany-Flavell, told delegates on Monday at the annual meeting of the American Sugar Alliance that the percentage of cane being turned into the alternate fuel ethanol in top grower Brazil will likely rise to 58 percent from the current level around 55 percent.
He said the top reason for the larger share of cane going into ethanol is "in anticipation of larger global (ethanol) requirements."
The Brazilians are "also chomping at the bit" for the U.S. to reduce or eliminate its stiff tariffs on imported ethanol, Ruffalo added.
India's sugar production is expected to fall and China will see output slide at the same time that consumption is expanding steadily.
"They're (the Chinese) going to have to import as much sugar as in the past five years," explained Ruffalo.
Those factors cover the supply and demand situation for sugar in the world. The other three major factors influencing sugar prices are the performance of crude oil, the gyrations of the dollar in the foreign currency market, and the speculation by investment funds who have poured into the commodity sector.
Ruffalo said sugar is "still a hedge for food primarily," but the sweetener is slowly moving away from being treated that way. "Some of the index funds are treating commodities like stocks," he said, adding this has jacked up volatility in commodity markets.
Sugar prices have been trading between 13 and the upper reaches of 14 cents, with many analysts predicting that values of the spot sugar contract in New York will likely try to pierce 15 cents and higher in the months ahead.