28-year sugar high on Indian drought threat

The rally in sugar prices gathered momentum on Monday amid concerns about tight supplies and low stocks.

ICE October raw sugar, the global benchmark, jumped 4.8 per cent to 21.80 cents a pound, the highest level since mid-1981.

The market is viewed as being in uncharted territory, having traded above current levels only on two previous occasions. Both involved massive spikes. Prices surged above 50 cents per pound in 1974-75 and 1980-81.

Raw sugar prices have already risen 84.6 per cent this year as bad weather has affected output in Brazil and India, the world's two largest producers.

The latest weather reports from India, the world's largest sugar consumer, indicated no significant improvement in this year's monsoon and fears are growing that some of the country's key agricultural growing regions could face drought.

On Monday, Egypt said import duties on raw and white sugar imports would be suspended from August 15 until the end of the year to bolster supplies.

In London, Liffe October white sugar rose 4.1 per cent to $559 a tonne, up 75.9 per cent this year.

Sugar inventories are estimated to be at record lows as many producers and physical traders maintain minimal stock levels to reduce costs.

Analysts at Czarnikow, the sugar broker, published a revised estimate for global sugar stocks of about 20m tonnes, well below the range of current market estimates of between 30m tonnes and 70m tonnes. China, India, Brazil, Europe and the US account for 65 per cent of all stocks.

"Aside from Europe and China which are carrying surplus stock, most countries are running short of sugar," said Toby Cohen, director at Czarnikow. "This is the case even in the top five stock holding countries, as both India and the US need to increase imports in 2010 to prevent demand over-running supply."

Mr Cohen warned that India's stock position looked particularly vulnerable, with inventories on course to fall as low as 2.2m tonnes during the Diwali festival in mid-October, before new season supplies become available.

Czarnikow said low stocks were not only a problem in the developing world as the US stocks-to-consumption ratio could fall to 10 per cent this year, suggesting higher imports would be required.

Crude oil prices weakened, with Nymex September West Texas Intermediate closing 33 cents lower at $70.60 a barrel and ICE September Brent off 9 cents at $73.50 a barrel.

In Chicago, trading in grains and soyabeans was cautious ahead of tomorrow's US Department of Agriculture August crop report.

CBOT September corn rose 5 cents to $3.27 a bushel while CBOT September wheat added 8 cents at $4.97½ a bushel, but CBOT August soyabeans dipped 10 cents to $10.74½ a bushel.

The consensus view is for the USDA to revise its 2009/10 corn production forecast from 12.29bn bushels to 12.508bn bushels, helped by higher yield estimates, up from 153.4 bushels an acre to 157.5.

The USDA forecast for the 2009/10 soyabean crop at 3.26bn bushels, a record, could be trimmed to 3.225bn bushels.

WHAT IS GLOBAL WARMING?

Carbon dioxide and other gases warm the surface of the planet naturally by trapping solar heat in the atmosphere. This is a good thing because it keeps our planet habitable. However, by burning fossil fuels such as coal, gas and oil and clearing forests we have dramatically increased the amount of carbon dioxide in the Earth’s atmosphere and temperatures are rising.

The vast majority of scientists agree that global warming is real, it’s already happening and that it is the result of our activities and not a natural occurrence.¹ The evidence is overwhelming and undeniable.

We’re already seeing changes. Glaciers are melting, plants and animals are being forced from their habitat, and the number of severe storms and droughts is increasing.

	The number of Category 4 and 5 hurricanes has almost doubled in the last 30 years.2
	Malaria has spread to higher altitudes in places like the Colombian Andes, 7,000 feet above sea level.3
	The flow of ice from glaciers in Greenland has more than doubled over the past decade.4
	At least 279 species of plants and animals are already responding to global warming, moving closer to the poles.5

If the warming continues, we can expect catastrophic consequences.

	Deaths from global warming will double in just 25 years -- to 300,000 people a year.6
	Global sea levels could rise by more than 20 feet with the loss of shelf ice in Greenland and Antarctica, devastating coastal areas worldwide.7
	Heat waves will be more frequent and more intense.
	Droughts and wildfires will occur more often.
	The Arctic Ocean could be ice free in summer by 2050.8
	More than a million species worldwide could be driven to extinction by 2050.9

There is no doubt we can solve this problem. In fact, we have a moral obligation to do so. Small changes to your daily routine can add up to big differences in helping to stop global warming. The time to come together to solve this problem is now – TAKE ACTION

¹ According to the Intergovernmental Panel on Climate Change (IPCC), this era of global warming "is unlikely to be entirely natural in origin" and "the balance of evidence suggests a discernible human influence of the global climate."
² Emanuel, K. 2005. Increasing destructiveness of tropical cyclones over the past 30 years. Nature 436: 686-688.
³ World Health Organization
⁴ Krabill, W., E. Hanna, P. Huybrechts, W. Abdalati, J. Cappelen, B. Csatho, E. Frefick, S. Manizade, C. Martin, J, Sonntag, R. Swift, R. Thomas and J. Yungel. 2004. Greenland Ice Sheet: Increased coastal thinning. Geophysical Research Letters 31.
⁵ Nature.
⁶ World Health Organization
⁷ Washington Post, "Debate on Climate Shifts to Issue of Irreparable Change," Juliet Eilperin, January 29, 2006, Page A1.
⁸ Arctic Climate Impact Assessment. 2004. Impacts of a Warming Arctic. Cambridge, UK: Cambridge University Press. Also quoted in Time Magazine, Vicious Cycles, Missy Adams, March 26, 2006.
⁹ Time Magazine, Feeling the Heat, David Bjerklie, March 26, 2006.