Sugar futures for October delivery continued to edge higher over the week as investors eyed repeated downward revisions to Brazil's crop and the diminishing 2011/12 world surplus.
 
Factors including aging cane and weather have caused analysts to cut Brazil's crop forecasts to below 500 million tonnes. These largely underestimated problems in the world’s biggest sugar exporting country have pushed sugar prices up almost 3% this week, and remain within striking distance of their contract high. Further supporting higher sugar prices this week has been ongoing reports that India, the world’s biggest sugar user, may produce less than it consumes and Indonesia, Southeast Asia’s largest sugar buyer, may produce less sweetener this year than earlier forecast after excess rains lowered the yields.
 
Buying by India would add to demand from China, the second biggest user, and Indonesia, draining global supplies. The current demand for spot sugar, due to the ongoing festive season, is another catalyst helping to drive up the price of futures contracts. However, this morning sugar futures prices fell almost 4% as speculators reduced their positions amid sudden speculation of sufficient stock availability in the spot market. Nevertheless diminishing crop prospects for top producer Brazil and increasing world demand prevented the prices from dropping further. Sugar for October delivery was trading at 28.96 cents a pound as of 11am (London time) on Thursday.