Hedge Funds Increase Bullish Sugar Bets to Highest in a Year

Date: Monday, March 14, 2011
Author: Elizabeth Campbell and Chris Prentice, Bloomberg

Hedge funds increased bullish bets on sugar to the highest in more than a year on expectations that worldwide demand will increase.

In the week ended March 8, funds and money managers increased net-long positions, or wagers on rising prices, by 18 percent to 153,941 contracts, the highest since February 2010, government data showed on March 11. Futures in New York reached a 30-year high last month on concern that global supplies will trail demand after crop damage in Australia and India.

Last week, Thailand, the world’s second-largest exporter, sold a combined 92,000 metric tons to four trading companies in an auction. Global food costs reached a record in February, according to a United Nations index, stoking political unrest that toppled governments in Tunisia and Egypt.

Funds bought the commodity “on the expectation that food prices would continue to rise,” said Phil Streible, a senior strategist at Lind-Waldock, a broker in Chicago. “Thailand had supportive export data, which showed there’s still an appetite for sugar.”

On March 11, raw sugar for May delivery gained 0.15 cent, or 0.5 percent, to 28.86 cents a pound on ICE Futures U.S. in New York. Sugar has tumbled 21 percent since reaching a 30-year high of 36.08 cents on Feb. 2.

“They’re buying on the pullback, hoping prices would run back up,” said Fain Shaffer, the president of Infinity Trading Corp., a commodities brokerage in Medford, Oregon.

Brazil is the biggest exporter.

To contact the reporters on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net; Chris Prentice in New York at cprentice3@bloomberg.net