Sugar Set for Worst Monthly Drop Since 1999 on Economic Slump

By Marianne Stigset

Oct. 31 (Bloomberg) -- White sugar headed for its biggest monthly drop since 1999 in London as investors cut their holdings in commodities on concern that a global economic slump will curb demand for raw materials.

The Reuters/Jefferies CRB Index of 19 raw materials has plunged 23 percent this month, the steepest decline since at least 1956. The U.S. Dollar Index, which measures the currency's performance against six counterparts, has risen 7.9 percent this month, the best performance since October 1992 and making commodities more expensive for those with other currencies.

``October is at last ending -- the worst month in commodity history,'' said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. ``Investors are expecting lower growth for the longer term and that is putting prices under pressure.''

White sugar for March delivery fell $2.30, or 0.7 percent, to $333.60 a metric ton as of 10:02 a.m. on the Liffe exchange in London. The sweetener has declined 15 percent this month, the steepest drop since April 1999.

``Global sugar prices continued their free fall as the gloomy outlook on global economies and a strong U.S. dollar weighed on the market,'' Ratzeburg, Germany-based F.O. Licht said in a report this week.

World sugar demand will grow 1.8 percent in the season that started this month, less than half last year's pace because of a slowing world economy, Licht said on Oct. 29.

Spending by U.S. consumers probably dropped in September, capping its weakest quarter in three decades and signaling the economy will continue to slump in coming months, economists surveyed by Bloomberg said before a report today.

Demand Growth

Global demand growth will be down from 3.8 percent last year, according to Licht. Supply will outpace demand by 472,300 metric tons, compared with a global supply surplus of almost 9.1 million tons in 2007/2008, according to the report.

Research company Societe Kingsman SA expects world demand for sugar to surpass output by 3.8 million tons next season, ending two years of surplus.

Among other agricultural commodities, cocoa futures for December delivery fell 7 pounds, or 0.5 percent, to 1,319 pounds ($2,128) a ton on Liffe. Robusta for January delivery dropped $22, or 1.4 percent, to $1,588 a ton on Liffe.

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net