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The leading traders of physical raw sugar claim that the commodity is likely to surge to a 30-year high in the coming months, with all eyes on the pending Indian sugar crop output which is hoped will ease supply pressures, according to FoodNavigator.com.

According to the report, Cargill, the US agribusiness group, and Sucres et Denrées of France, the two largest traders of physical raw sugar with about a third of the market between them, was quoted by Financial Times saying that very low global supplies of sugar over the coming months would create high volatility in the market and could produce sharp price jumps.

Dry Brazilian weather, strong demand and expectations of an impending Q1 2011 trade flow deficit have driven the commodity to new highs.

And with global stocks very low and the projected 2010/11 production surplus looking vulnerable, Rabobank recently noted that “it is hard to argue that current prices are wildly overstating the situation.”

The high sugar prices and strong sales to other destinations have made the EU a less attractive destination for exporters, notes the USDA in a recent Gains report, with the result being a lowering of EU sugar imports by 0.5 million metric tonnes (MT) in market year 2009/2010 compared to 2008/09.

Meanwhile, the European Commissioner for Agriculture and Rural Development, Dacian Cioloş, speaking at the Farm Council meeting on Tuesday, said that the EC is monitoring sugar prices and import levels “week by week”, but does not regard it as a matter of urgency to intervene now.

Cioloş said that for the year 2010/2011, a provisional report presented by the Commission to member states and other stakeholders last month, did forecast a slight deficit between the supply sugar quota and needs, estimated at 0.17 million tonnes.

And he further commented that in the context of volatility and rising global sugar prices, the relative stability of prices on the domestic market is an indicator that the EU sugar market has been under-supplied.

The EC can move to relieve the pressure on sugar stocks by using Regulation (EC) No 1234/2007 to suspend import duties in whole or in part for certain quantities where sugar prices on the European market rise or fall significantly or where sugar prices on the world market reach a level that disrupts or threaten to disrupt the availability of EU supply. — Source: FoodNavigator.com

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