It is a sweet time to be stocked up on sugar.
The price of raw sugar has risen 21.4 per cent in the past 10 months as worries linger over the possibility that adverse weather will reduce the crop in South America.
In Brazil, exports have been hit hard after bad weather harmed agricultural and sucrose yields. Brazil is the world's main producer of raw sugar. Sugar holdings yesterday climbed to the highest since August, up 45 per cent, according to data from the US commodity futures trading commission. Production in Brazil's central sugar-growing region dropped 6.6 per cent as of February 15, after farmers harvested the smallest cane crop in four years, according to Unica, an industry association.
"Weather and the perception of damages to supply" have pushed prices higher, Osvaldo Canavosio, the head of emerging markets and commodities research at Man Investments USA, told Bloomberg News.
"There's been a continuing pattern of the rest of the world outside the US being an important driver of supply-and-demand dynamics."
Output in India, the world's second-largest producer, may fall to 24 million tonnes or 25 million tonnes in the 2012/2013 harvest, according to forecasts by Banco Itau, a Brazilian wholesale bank. Production in the previous year period reached between 26 million tonnes and 28 million tonnes.
Import demand from China is expected to remain robust, owing to a tight balance in the second half of last year spilling into this year, said Hussein Allidina, the head of commodities research at Morgan Stanley in New York. "China will likely continue relying on imports to replenish state reserves and fill its own domestic production shortfall," Mr Allidina added.
There are no publicly traded sugar refineries in the UAE, but giants such as Al Khaleej Sugar Company, based in Jebel Ali, are expected to see fatter margins.
Demand for sugar is considered safe. Even if it costs a few extra dirhams, consumers will want still their sweets, kanafas and baklavas.