Global sugar prices are likely to stay high in the coming year, analysts say, as India, the world's largest consumer of the commodity, reels from poor monsoon rains that will force it to rely on imports.
India could import more than six million tonnes this year, its highest in a decade. That will keep world prices high for a commodity whose supply is expected to fall short of demand by some nine million tonnes globally in 2008-09, according to the International Sugar Organisation.
In India, sugar has major social and political implications, is a key part of the diet and an essential ingredient for delicacies at religious festivals. Analysts said that each time India enters the global market, prices could spike.
On Monday, sugar markets around the world had jumped to highs not seen since the 1980s. The benchmark raw sugar futures at the New York-based Intercontinental exchange rose 5% to 22 cents a pound for October delivery - the highest since March 30, 1981.
White sugar prices also increased to a 26-year high in London at 557.4 dollar a tonne.
India had two years of record sugar production between 2005 and 2007, which saw the country export five million tonnes of sugar.
Abnormally large stocks and low prices prompted farmers to shift focus towards crops like soya and cotton, which gave better yield and profit. This led to a 45% drop in sugar output in 2008-09 as yields fell and forced the country to look overseas to fill the gap.
Now, sporadic rains - or even none at all - during the June to September monsoon, which is vital for sowing many major foodstuffs, including sugar, has caused many farmers to say that crops are going to fail.
Output in India's biggest sugar-producing state, Maharashtra, could drop to 4.7 million tonnes in the season ending September, the Maharashtra State Co-operative Sugar Factories Federation said. The second-largest sugar-producing state, Uttar Pradesh, in northern India, has also seen deficit rains this year.
