Sugar prices rallied to a six-month high on the back of extremely strong physical demand and export bottlenecks in Brazil, the world’s largest exporter, where more than 100 ships wait to upload.

Other so-called soft commodities were also strong on Tuesday, with cotton prices hitting a 15-year high and Arabica coffee rising to a 13-year high in New York.

ICE October raw sugar hit an intraday high of 21.47 cents per pound, up more than 4 per cent on the day and the highest since early March.

Traders and analysts said the rally reflected strong physical demand for the sweetener, with speculators mostly on the sidelines for the time being. Traders added that Cargill, the US-based agribusiness which is the world’s largest trader of agricultural commodities, and its Paris-based rival Louis Dreyfus Commodities were among the most bullish houses on sugar.

Brazil biggest sugar loading portThe price of the sweetener has surged about 10 per cent since August as a rush of importers sought urgent supplies after running down their inventories in late 2009 and early 2010.

Raw sugar prices are, nonetheless, well below the 30-year high of 30.40 cents set in early February. Even so, prices have surged 65 per cent from a year-low of 13 cents set in May.

The strong demand for sugar for immediate delivery has caused a huge backlog in Brazil’s export terminals of Santos and Paranaguá, where more than 100 vessels await to upload, analysts and traders said.

“There is more demand than Brazil could accommodate,” said Peter de Klerk, analyst at Czarnikow, the London-based merchant.

Brazil exported a record 2.6m tonnes of sugar last month, clear evidence of strong demand. Brazil is expecting a record sugarcane crop this year.

Jonathan Kingsman, head of Lausanne-based Kingsman sugar consultants, said that, beside strong demand, physical traders were also concerned about potential weather problems in Russia, where a drought has devastated crops, dryness in Brazil and too much rain in Indonesia and Pakistan.

The bad weather has already cut the size of some crops and traders believe the import-export market could be short of sugar in the first half of next year.

(C) The Financial Times Limited 2010