Sugar drops on likely bumper cane crop in Brazil, India

White sugar fell for a fourth consecutive trading session in London on reports that Brazil and India, the world's biggest producers, will harvest more cane than forecast this year.

High prices and increased demand for ethanol, an alternative fuel made from cane or corn, has spurred farmers to step up plantings.

Brazil, the world's biggest producer, will harvest a record 490 million tonne this year, according to the government statistics agency IBGE. India is likely to harvest a record 26.1 million tonne this season, according to C Czarnikow Sugar, the world's largest sugar broker.

"There's going to be more production than previously forecast,'' Elizabeth Miller, director of research at RedTower in Aberdeen, Scotland, said in an interview today. Rains in Brazil's main cane-growing region will help the yield and lead to a bumper harvest, Miller said.

Refined, or white, sugar futures dropped $1.50, or 0.5 per cent, to $328.90 a tonne on the Euronext.liffe exchange, the lowest closing price since February 21. They declined 3.5 per cent last year after surging 37 per cent in 2005.

Sugar may fall as low as $320 a tonne, Miller said. "The drop is overdone. Yes, Brazil will have a big harvest, but it will also devote 53 per cent of that to producing ethanol. The market's got a bit carried away.''

Sugar also declined as oil prices retreated after Prime Minister Tony Blair said the UK will negotiate with Iran on the release of 15 British sailors and Marines being held captive, easing concern the dispute would disrupt crude supplies from the Middle East.

Sugar surged to a record $497 a tonne in May, partly as record energy prices sparked investor interest for alternative fuels, such as ethanol.

Crude oil for May delivery declined as much as $1.74, or 2.6 per cent, to $64.20 a barrel on the New York Mercantile Exchange and was at $64.35 at 3:21 p.m. London time. Oil has risen about 3.4 per cent since March 23, the day the sailors and marines were seized. The sugar market is under pressure from bearish fundamentals,'' Michael Davies and Andrey Kruychenkov, analysts with commodity broker Sucden (UK) in London, wrote today in an e-mail.

Refined sugar in London and raw sugar in New York may decline this week, a survey conducted by Bloomberg on March 30 showed. Eight of 11 traders, analysts and brokers forecast raw sugar will fall for a sixth straight week in New York. Raw sugar is down 47 per cent in the past year. Seven of 10 surveyed said white sugar traded in London will fall, extending last week's 3.8 per cent drop.

Among other so-called soft commodities traded in London, cocoa gained 19 pounds to 1,020 pounds ($2,106.69) a metric tonne, while robusta coffee rose $13 to $1,538 a tonne.