Sugar futures soar to 3-week high on Thai crop concerns

Forexpros – Sugar futures were sharply higher on Monday, rallying to a three-week high as growing fears over sugar crop conditions in Thailand and a broadly weaker U.S. dollar buoyed prices.

On the ICE Futures U.S. Exchange, sugar futures for March delivery traded at USD0.2618 a pound during European morning trade, soaring 3.64%.

It earlier rose by as much as 3.9% to trade at USD0.2650 a pound, the highest price since September 22.

Concerns over Thailand’s sugar harvest intensified over the weekend after Prasert Tapaneeyangkul, Secretary General of Thailand’s Office of the Cane and Sugar Board said Sunday that nearly 3.4 million acres of land in key growing regions in northern Thailand were under water.

In Bangkok, authorities opened army camps to help house some of the 2.4 million people displaced by the floods, the worst in nearly 50 years.

Earlier Monday, the nation’s finance ministry cut its forecast for economic growth to 3.7% from 4%, saying that the floods may cause up to USD3.9 billion of damage.

Meanwhile, Bank of Thailand Governor Prasarn Trairatvorakul said that the situation is “quite worrisome”, while adding that agricultural industry losses may total as much as USD650 million.

Thailand is the world's second largest sugar exporter after Brazil and has estimated its sugar cane output at 99.4 million tonnes in the 2011-12 season.

Sugar prices found further support as the U.S. dollar came under broad selling pressure after German Chancellor Angela Merkel and French President Nicolas Sarkozy said that they have reached an agreement to recapitalize European lenders, following a meeting in Berlin on Sunday

The package will be revealed by the next G20 summit in Cannes starting November 3, according to reports.

The euro rallied nearly 1.9% against the greenback on the news, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 1.3% to trade at an eight-day low of 78.06.

A weaker dollar boosts the appeal of U.S. crops to overseas buyers and makes commodities more attractive as an alternative investment.

Elsewhere, on the Chicago Mercantile Exchange, wheat for December delivery jumped 2.12% to trade at USD6.2088 a bushel, corn for December delivery rose 1.65% to trade at USD6.1013 a bushel, while soybeans for November delivery climbed 2.23% to trade at USD11.8488 a bushel.