IT MAY not attract the same attention as crude oil or gold, but the potential for multi-decade highs means that white sugar deserves a closer look from spread betters looking to diversify their trading portfolio.<br /><br />Raw sugar futures hit three-year peaks of at the end of last week with New York’s October contract touching a session high of 18.86 cents per pound. A rally beyond 20 cents per pound would be the highest on the monthly charts for sugar in 28 years. <br /><br />In London, the front month white sugar contract hit a three-year peak of $492.80. Sugar has now rallied more than 45 per cent year-to-date and is the third most rising commodity in 2009.<br /><br />The sugar price has been climbing steadily higher amid concerns about weather-related production problems in Brazil and India. Brazil is the world’s largest producer of raw sugar but heavy rains in the South American country indicate that total production will be well below expectations. <br /><br />India, the world’s biggest consumer of sugar, is expected to import up to 5m tonnes of sugar in 2009/10 due to strong domestic demand and sharply lower output, merchant Sucden Financial said earlier this week in its quarterly market report. <br /><br />India grows a lot of sugarcane but drought in Uttar Pradesh, which accounts for one-third of India’s sugarcane production, has raised the possibility of steep downward revisions to India’s production outlook in 2009/10 in the face of strong domestic demand, say Morgan Stanley analysts in a research note.<br /><strong><br /></strong><strong>SQUEEZING UPWARDS</strong><br />Not only is tighter supply squeezing the sugar price upwards, so too is speculator activity. “Commodity Futures Trading Commission data indicate that speculators are buying sugar again. It is risky to come to the party this late, but the growing open interest in March 2011 $0.30/lb calls an option to buy at this price indicates just how high hopes are running,” Morgan Stanley adds. <br /><br />However, Lloyds TSB’s senior technical analyst Paul Rodriguez warns that that while sugar continues to rise towards long-term targets, the commodity may need to consolidate gains in the short-term. <br /><br />In such a situation, we may see a period of rangebound sideways trading, perfect for day traders looking to capture a few points’ profit here and there, but less profitable for directional traders.<br /><br />All the major spread betting providers offer raw sugar contracts to their clients. IG Index offers trading on Liffe Sugar No 5 between 8.45 and 17.30 Monday to Friday with a spread of two basis points and a minimum trade size of £15.<br /><br />GFT offers spread betting on both London sugar and US Sugar No 11 Futures. With the latter, the spread is 0.06 with an 8 per cent margin. Trading hours are between 3.30-14.00 US Eastern time.<br /><br />While sugar might be nearing strong resistance levels, spread betters can look to buy on the dips in the near-term and then wait to see whether the commodity breaks through the multi-decade highs or reverses lower.