Sugar prices topped 20 cents a pound for the first time in five months on Friday morning as the US government responded to tightness in the physical sugar market by relaxing trade regulations.
The US Department of Agriculture on Thursday night widened the time window in which raw sugar imports for the 2009-10 trade year could enter the country. It also said imports for the 2010-11 trade year could enter the country a month earlier than usual.
The move was “in response to increased tightness in the US raw sugar market”, the USDA said.
ICE October raw sugar jumped 3 per cent to hit a peak of 20.07 cents a pound, while Liffe October white sugar rose 3.1 per cent to $575.90 a tonne. White sugar was not covered by the USDA’s announcement.
The decision to widen the import window comes as sugar importers are struggling to secure their import quotas because of bottlenecks in the supply chain.
Consumers have been rushing to buy sugar in recent months after running down inventories when prices spiked to a three-decade high above 30 cents in January.
That has resulted in a logjam in Brazil, the world’s largest exporter, pushing up prices in spite of expectations of a large harvest. Raw sugar has rallied 50 per cent since May and apart from the spike earlier this year is at its highest level since 1981.
There is a long line of ships waiting outside Brazilian ports to load raw sugar as the country struggles to load the new season’s crop fast enough to satisfy international demand. The waiting list has eased in recent weeks from its peak last month, according to data from shipping brokers, but delays persist.
Nick Penney, senior trader at Sucden Financial, said: “If we maintain these levels, it is likely fresh buying could emerge later on in the session. A close over 20 cents would then represent a breakout and possibly a new ‘ball game’.”
US sugar inventories will next year fall to the lowest in at least 40 years, according to USDA forecasts, while the International Sugar Organisation expects this year to see the lowest global stocks of the sweetener in 20 years.
Elsewhere in commodity markets on Friday, oil and metals prices fell as market sentiment turned negative after disappointing economic data from the US in recent days.
Nymex September West Texas Intermediate dropped 82 cents to $73.61 while copper for delivery in three months was 1.4 per cent lower at $7,219.75 a tonne on the London Metal Exchange.
