Sugar hits 17-year high

March 30 | Updated: Mar 31 2006, 05:30am hrs
Sugar prices in London rose to the highest since at least 1989 as investment funds bought the sweetener as an alternative asset.

Investors are buying sugar because it is outperforming other assets. White sugar has risen 90% in the past 12 months,while the Standard & Poors 500 Index has climbed 10%. Sugar is also outperforming commodities such as gold and silver, which rose 35% and 60%, respectively, in the past year.

Investment funds are looking further afield to find a good return, and sugar is delivering just that, Nick Penney, a senior trader with Sucden (UK) Ltd, a London-based commodities broker, said in an interview on Thursday.

White, or refined, sugar has surged 90% in the past year as demand from fast-growing economies such as China and India outpaces supply from Brazil, the worlds biggest raw sugar producer.

Sugar for May delivery rose as much as $2, or 0.4%, to $480 a metric tonne on Londons Liffe exchange, the highest on record for data available from the exchange that goes back to January 1989. It traded at $477.90 as of 11:51 a.m. local time.

Raw sugar for May delivery rose 0.2% to 18.20 cents a pound on the New York Board of Trade on Wednesday. Raw sugar, which rose to a 25-year high of 19.73 cents on Feb 3, has more than doubled in the past year.

Brazil is diverting half of its sugar cane crop to making ethanol, an alternative fuel made from sugar, amid record oil prices.

People are beginning to wake up to the fact that ethanol is the next fuel, Mr Penney said.