Sugar Rises Most in 4 Years as Dollar's Drop Boosts Commodities

By Ron Day

Oct. 29 (Bloomberg) -- Sugar prices rose the most in four years in New York as the weaker dollar trimmed the costs of commodities including crude oil for buyers using other currencies.

The dollar slipped against the yen and euro before the Federal Reserve cut interest rates to 1 percent from 1.5 percent. A weaker dollar reduces commodity costs for purchases made with euros or yen. A rise in crude-oil prices boosts demand for ethanol, which is made from sugar cane in Brazil.

``The dollar is selling off and that's contributing,'' said Donna Heidkamp, a senior trading adviser at RJO Futures in Chicago. Sugar's gain accelerated after it passed so-called key technical levels of 11.35 cents a pound and 11.50 cents, indicating the commodity was ``extremely oversold,'' she said.

Raw-sugar futures for March delivery rose for a third day, jumping 0.95 cent, or 8.5 percent, to 12.09 cents a pound on ICE Futures U.S. in New York. It was the biggest one-day gain since Oct. 13, 2004.

The price has climbed 12 percent this week, and sugar is the top gainer this year in the Reuters/Jefferies CRB Index of 19 raw materials. Still, sugar is down 20 percent from this year's high of 15.07 cents on March 3.

Sugar prices are also being helped by sliding output in Brazil, the world's biggest sugar producer and maker of fuel from cane, Heidkamp said. Output in the country's Center South region plunged 24 percent in the first half of this month from a year earlier, to 1.63 million tons, industry group Unica reported on Oct. 27.

Above-average rainfall, which pares sugar yields, has slowed the harvest, Unica said. Brazilian mills this year have also turned more cane into ethanol instead of sugar.

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