Sugar prices are up 30 percent since the start of the year and are set to climb further in the wake of a poor Indian harvest that has dented supplies after years of overproduction, analysts said Tuesday.
"We do believe the risk of prices moving higher is significant," said Toby Cohen, analyst at Czarnikow Group.
New York sugar prices struck a three-year high 16 cents a pound last Friday and prices are set to advance further, he added.
"The drastic underperformance of the 2008/09 Indian harvest alongside those in several other northern hemisphere locations has laid the way for a global (sugar) deficit of historic proportion, thus offering a seemingly irrefutable fundamental case for strong price performance," according to Barclays Capital analyst Nicholas Snowdon.
"The question that faces investors now is whether that was the sum gain of the market deficit expressing itself, or whether there is more value to be extracted, and in that vein, how the influential variables affecting the 2009/10 market balance are evolving."