Sugar prices rise on fears that the Iran war will increase ethanol demand and lower sugar production

The world sugar price rose 'on Monday, on the fear that the U.S./Israel war against Iran, which is disrupting energy supplies worldwide, would cause Brazilian sugar?cane mills to produce less sugar and more ethanol. Ethanol, a biofuel made from cane, is produced by mills. The mills of Brazil, the world's largest sugar producer, will use less cane for fuel production, which means they have less raw material available to make?sugar. Sugar is a staple food and calorie source in developing countries. At 1215 GMT, 'raw sugar price futures' on the ICE were up 1%, at 14.23 cents per lb. They had gained nearly 3% earlier. White sugar futures, meanwhile, rose 2.1%, to $416.30 a metric tonne, after earlier gaining more than 3%.

The world oil and natural gas prices are on the rise as the Iran conflict causes the closure of oil and gas installations across the Middle East, and the disruption of shipping in the Strait of Hormuz.

Sugar market consultant says that Petrobas, Brazil's state oil company, is likely to increase gasoline prices in the country at some point.

He said there were also concerns that the conflict could impact the ability of sugar refineries to produce "white or processed" sugar in the Gulf, either by limiting the ability to import raw or by increasing the cost of imports.

The 'war' could drag on, however, and threaten the 'global economy. It would also boost inflation which, in turn, could cap sugar prices by reducing demand for the sweetener.

Other soft commodities include arabica coffee, which fell 0.3% per lb to $2.7995, while robusta coffee rose by 2.5% to $3.713/t.

(source: Reuters)