After four consecutive years of annual price declines, 2015 could see sugar stage a sweet comeback.
A slew of supply disruptions have propelled ICE raw sugar prices 36 percent higher to about 14 U.S. cents a pound on Wednesday, up from a seven-year low of 10.44 cents in August, and analysts believe the gains are likely to continue amid sliding output from the world's top producers.
"In India, an early withdrawal of the monsoon and higher ethanol output in Brazil could be disruptive enough to drive the market into a severe deficit, as seen in 2009, when the sugar price rallied 90 percent in just four months," Barclays pointed out in a recent report.
The past few years have been anything but a sugar high for the commodity. Prices have plunged 25 percent over the past two years as countries churned out record production, but fortunes now appear to be changing.
A milder-than-expected monsoon in India, the world's second-biggest producer, could see its sugar output decline 5 percent this year, as Maharashtra and Uttar Pradesh, key sugar-producing regions, experience rains 20-50 percent below normal. Even though India boasts high inventory levels, Barclays believes a severe drought brought on by the El Nino weather phenomenon could force the country to convert from a sugar exporter to an importer this year.