Rising demand in Brazil for ethanol use in cars, along with higher prices for the fuel, has increased expectations that sugar canes could be used to produce energy, further lowering the supply outlook. The weakness in the Brazilian real currency over the past year has made ethanol an attractive alternative to higher-priced, U.S. dollar-denominated gasoline.
Additionally, sugar is gaining momentum as a return of the El Nino weather phenomenon led to drier conditions diminishing output in India, the smallest crop in a decade across China and heavy rains in Brazil that has slowed harvesting. [2 Sweeteners Helping Sugar ETF]
Fueling the gains in sugar prices, money managers have increased wagers on sugar, with futures trades setting a new record in September and bullish bets at a two-year high this month, according to the Commodity Futures Trading Commission.
iPath Bloomberg Sugar Subindex Total Return ETN
For more information on the sugar market, visit our sugar category.
Max Chen contributed to this article.