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Sugar Rises in London on Speculation About Deficit and Dollar

LONDON, Dec 1, 2009 (Bloomberg) By M. Shankar

White sugar rose in London, rebounding from the first drop in six sessions, on speculation that a global supply deficit and a weaker dollar will support demand.

Worldwide use will exceed production by 13.5 million metric tons in the 2009-10 season, sugar broker Czarnikow Group Ltd. said last week. Excess rains in Brazil and a weak monsoon in India hurt output from the world’s two biggest producers. Sugar stockpiles in India, the largest consumer, have fallen to 2 million tons from 10 million tons a year earlier, according to Gary Mead, an analyst at VM Group in London.

“During the 2009-10 season, we envisage India importing at least 8 million tons, simply to keep ongoing demand satisfied,” Mead wrote in a monthly report e-mailed today. “That will be followed in the 2010-11 season by the need for yet more imports, although at a much lower level, of up to 3 million tons.”

White, or refined, sugar for March delivery climbed $8.70, or 1.4 percent, to close at $619 a ton on the Liffe exchange. Raw sugar for March delivery advanced 1.1 percent to 22.88 cents a pound on ICE Futures U.S. in New York.

China, the second-largest sugar consumer, may need 1.6 million tons from imports or stockpiles to meet demand, Mead wrote. Planted areas in the country’s main cane-growing province of Guangxi are likely to fall 2 percent, while the decline in output could be more severe in northern China because beet acreage may have contracted by 25 percent in the 2009-10 season as farmers switched to grains, he wrote.

Dollar Slides

The U.S. Dollar Index, which gauges the currency’s performance against six counterparts, fell as much as 0.8 percent. That made dollar-priced raw materials cheaper in terms of other monies. The 24-contract S&P GSCI index of commodities added 1.6 percent, extending its annual gain to 49 percent.

Mozambique will export 126,000 tons of sugar this year, less than the targeted 200,000 tons, because of lower production, broadcaster Canal de Mocambique reported, citing the National Agriculture Promotion Centre.

Among other agricultural commodities traded on Liffe, robusta coffee for January delivery slipped $7, or 0.5 percent, to $1,347 a ton after two gains in a row. Cocoa for March delivery rose 32 pounds, or 1.5 percent, to 2,205 pounds ($3,666) a ton.

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