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Sugar prices have soared 70% from their December lows, returning to the highs of early 2006. They were significantly higher a long time ago, however, when commodities were caught up in the inflationary boom times of 1974 and 1980. So is China buying up the world's sugar supplies, or is something else going on? Bloomberg tells me that the demand for sugar is very strong in India, and producers are having trouble keeping up with global demand in general.
4 comments:
Could some of the sugar demand be coming from the ethanol fuel game? With all the "Greenomics" going around, things just might be crazy enough for there to be profit in buying sugar and cooking it into fuel grade ethanol. At least in some jurisdictions.
My understanding is that the big source of ethanol, which as an aside is a ridiculous solution for our energy problem, is corn, and corn is not a major source of sugar. But I could be wrong.
I was thinking more about the world market than the domestic one. America uses corn for ethanol, to some extent due to the power of the corn lobby and governmental incentives.
But Brazil uses cane sugar for their ethanol. Since bulk sugar is fairly easy to import for nations without excess ag capacity, if one needed to generate a lot of fuel ethanol, maybe importing bulk sugar is the easiest way to go.
That's a good point about Brazil. But when all commodities are up, you have to look for a common denominator. The two big ones: global growth and easy money.
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