Sugar Rises Most in 2 Weeks as Oil Gain May Boost Ethanol Use

By Ron Day

Nov. 24 (Bloomberg) -- Sugar surged the most in two weeks amid speculation that higher crude-oil prices will boost demand for alternative fuels, including ethanol made from cane.

Oil rose as much as 11 percent after a $306 billion government rescue of Citigroup Inc. sparked a rally in European and U.S. equities. The U.S. currency dropped, making dollar- denominated commodities more attractive to foreign buyers and pushing the Reuters/Jefferies CRB Index of 19 raw materials up as much as 5.4 percent.

``Sugar is being supported by the weaker dollar and stronger crude,'' said Michael McDougall, a senior vice president for Newedge USA LLC in New York.

Raw-sugar futures for March delivery rose 0.44 cent, or 3.9 percent, to 11.72 cents a pound on ICE Futures U.S. in New York. The gain was the biggest for a most-active contract since Nov. 4. Sugar has declined in each of the past three weeks.

Still, the sweetener has rallied 20 percent in the past 12 months, the biggest gainer on the CRB Index.

The euro gained as much as 2.7 percent against the dollar as Citigroup's bailout reduced demand for the greenback as a haven. The currency has gained in seven of the past eight weeks, while the CRB moved in the opposite direction.

Sugar will most likely trade between 10.5 cents and 13 cents a pound through the end of the year, McDougall said. It has been trading in that range since late last month.

``With credit still struggling, we'll be in a range,'' he said. The price may move higher in next year's first quarter, McDougall said.

In another commodity traded on ICE, orange-juice futures for January delivery declined 0.35 cent, or 0.5 percent, to 76.45 cents a pound. The price has declined 47 percent this year.

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