hr: Money

Photo Credit: Uwe Hermann

The speculation that the current decline in sugar has fueled demands caused the commodity to rise in New York trading.

Since December 7, Futures have touched the lowest level on hunch that there will be an oversupply of the commodity globally by the year ending September 30, 2009. Meanwhile, the US dollar performed poorly against six other actively traded major currencies by 0.2 percent, coming down from an earlier 0.3 percent surge. This leaves traders one thing to do - invest in commodities as a hedge against the weaker dollar.

For July, there has been a rise in sugar futures by 0.05 cent, or 0.5 percent, to 10.02 cents per pound on ICE Futures U.S. Sugar earlier reached 9.82 cents, and for this week gained 0.1 percent. However, for the month of May the commodity declined by 15 percent.

“There is demand around. It’s slowing the drop. We are finding support but no impulse to move higher,” according to senior vice president Michael McDougall, Newedge USA LLC, New York.

Worldwide sugar production is expected to be greater than demand for the commodity by 3.29 million metric tons in the 2008 up to September 2009, according to Kingsman SA, sugar broker/researcher. Meanwhile the forecast by Czarnikow Group Ltd. is that the surplus will be reduced to about 1.6 million tons in 2009 from the year ending September 30’s 11 million tons.

The market has already acknowledge the fact that the US dollar has stabilized, and as a result the prices of sugar might again fall.