World sugar prices headed higher on Monday on fears the U.S.-Israel war against Iran, which is disrupting global energy supplies, will prompt Brazilian cane mills to produce more ethanol and less sugar.
Ethanol is a cane-based biofuel. If mills in top sugar grower Brazil use more cane to produce the fuel, they will have less of the raw material to produce sugar, a food staple and cheap source of calories for developing countries.
At 1552 GMT, raw sugar price futures on the ICE exchange were up 0.9% at 14.01 cents/lb, having earlier gained nearly 3%, while white sugar futures rose 1.6% to $414.30 a metric ton, having earlier gained more than 3%.
World oil and natural gas prices are surging as the Iran conflict forces shutdowns of oil and gas facilities across the Middle East and disrupts shipping in the crucial Strait of Hormuz.
The sugar market fears Brazil's state-run oil firm Petrobras will at some point increase domestic gasoline prices as a consequence, said a veteran sugar industry consultant.
He added there are also fears the conflict might limit the ability of sugar refineries in the Gulf to import raw sugar for processing.
If the war drags on, however, it would threaten global growth and boost inflation, which could in turn cap sugar price gains by hurting demand for the sweetener.
In other soft commodities, London cocoa rose 3.1% to 2,120 pounds per ton, after closing down 10% last week; New York cocoa rose 1.5% to $3,017/t; arabica coffee slipped 1.2% to $2.8410 per lb while robusta coffee rose 3.8% to $3,761/t.
(Reuters)