Sugar to Extend Gains on ‘Rationing Demand,’ Coleman Predicts

By Claire Leow and Netty Ismail

Oct. 16 (Bloomberg) -- Raw sugar, which has more than doubled in the past year, may extend gains on a lack of new supply until 2010 after bad weather hurt crops in India and Brazil, hedge fund manager Michael Coleman said.

There is “significant upside,” said Singapore-based Coleman, managing director of Aisling Analytics, which runs a $1.5 billion fund invested in agriculture and energy. “Until next summer, there’s no production response possible.”

Raw sugar has surged as drought in India and excessive rains in Brazil hurt output from the world’s top two producers. Global consumption will outpace supply by 6.9 million metric tons in the year to September, resulting in a second annual deficit, Macquarie Bank Ltd. said yesterday.

“You’ve consecutive global deficits,” Coleman, 49, told reporters today in Singapore. “The world will have to reply on rationing demand: and the way you ration demand is through high prices,” he said.

Raw sugar futures on ICE Futures U.S. in New York reached 25.43 cents a pound on Sept. 30, the highest price for a most- active contract since February 1981, and traded at 23.85 cents yesterday after gaining 5 percent. Coleman, who said in August that raw sugar may reach 40 cents, didn’t give a forecast today.

Sugar “has more highs left to test,” Kona Haque, a commodities strategist at Macquarie, said yesterday. India will have to import at least 6 million tons in the year that began Oct. 1, Macquarie forecast.

Output in Brazil’s Center South, the world’s largest sugar- producing region, fell 17 percent in the first half of September from a year earlier because of rain, industry association Unica said on Sept. 24. Brazil is the world’s biggest producer.

To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Netty Ismail in Singapore at Nismail13@bloomberg.net