Sugar Sinks for Second Day as Oil Drop Leads Commodities Lower

By Ron Day

Sept. 16 (Bloomberg) -- Sugar fell for a second day in New York as crude oil slid, leading commodities lower on speculation that Wall Street turmoil may slow global demand.

Crude fell to as low as $90.83 a barrel in New York, trimming demand for alternative fuel made from sugar cane, after insurer American International Group Inc. had its credit ratings cut and world stock indexes plunged. The Reuters/Jefferies CRB Index of 19 commodities declined as much as 0.6 percent, led by falling energy and metal prices.

``More long liquidation could come into play as AIG, who operates a large index fund, may redeem investors' money,'' Peter Hoyt, a Sucden (U.K.) Ltd. analyst in London, said today in a report. ``Other index funds may be subjected to the same process should shareholders opt to hold money in cash instead of keeping it in falling commodities.''

Raw-sugar futures for March delivery dropped 0.32 cent, or 2.3 percent, to 13.56 cents a pound at 8:46 a.m. on ICE Futures U.S., the former New York Board of Trade. Earlier, the contract sank as much as 3 percent.

To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.