Thursday, August 6, 2009

Sugar High

more on sugar from the FT.

Inflation-wary investors have lately kept a close eye on the rising price of hydrocarbons: oil has risen by a third this year. But carbohydrates are what they should be worried about. Shortages have pushed up raw sugar futures 65 per cent since January. On Thursday, prices broke through 19.75 cents a pound, reaching levels last seen in 1981. Refined white sugar is at a record high. Next year could see bigger price spikes.

Weather is the main reason. Drought in India, the world’s biggest consumer, has hit local harvests. Heavy rain in Brazil, the world’s largest sugar exporter, has wrought the same effect. Ominously, such weather patterns are typical of El NiƱo, the seasonal warming of the Pacific that can cause volatility across a wide range of commodities.