Concerns over shortages and speculative momentum have driven global sugar prices to hit 28-year highs in recent weeks, a leading analyst has claimed.

“Prices have eclipsed the highs reached in 2006, but remain well below the previous two sugar price events in 1980 and 1974,” Rabobank ‘s Anthony Arthur said today (14 August).

According to Arthur, world inventory levels have been run down because low “monsoonal” rainfall in India has resulted in a supply deficit in the country.

Rabobank is currently forecasting Indian sugar production of 14.5-15m tonnes, 45% below the 26.5m tonnes produced in 2007/08.

Meanwhile, Arthur said, sugar cane quality and the volume of cane milled in central and southern Brazil has been hit by the “wettest July for decades”.

“A global sugar deficit in excess of 10m tonnes in 2008/09, the largest on record, together with a forecast deficit of over 5m tonnes in 2009/10, will cut world stocks by 24% in only two seasons,” Arthur warned.

Another factor pushing up prices is that speculators have increased their net long position in the ICE sugar futures market by 20% in the past month alone.

“From a fundamental point of view, most of the bullish production news appears to be factored into prices,” Arthur warned.