SOFTS-Raw sugar hits 3-yr high on India outlook,

Jul 30 2009 9:23PM

* Brazilian prompt physical sugar seen at a discount

* India sugar mill chief S.L. Jain retires

(Adds trade comment, updates prices)

By Sharon Lindores

LONDON, July 30 (Reuters) - Raw sugar futures hit 3-year peaks on Thursday on investor buying boosted by expected demand in India, while ICE cocoa jumped close to Tuesday's 11-month highs aided by a weaker dollar and brought London up with it.

Coffee futures consolidated in modest volumes, traders said.

India is expected to import up to 5 million 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. [ID:nLS115975]

Sugar futures have risen on a perception that India will need to import the sweetener heavily into next year and due to a weather-delayed harvest in the key centre-south of Brazil, the world's top grower.

"The market's done remarkably well," David Sadler, a senior sugar dealer in London, said of the recent rally.

Sadler said he was a bit surprised by sugar's strength.

"If you look at the Indian situation, it still doesn't pay you to take sugar in there (to India). You'll lose money because the internal prices are still not that high," Sadler said.

He said India had a shortage as not much sugar was sowed and output was down in 2008/09. By the end of August India would have imported about 2 million tonnes and there was the potential to import more, but it was a question of how much and when.

"I think there's an awful lot of speculation in sugar and that is a concern because I just don't see the physical demand at the moment."

However, Sadler said he was optimistic sugar prices would go higher in the fourth quarter of 2009 and the first quarter 2010.

New York's October raw sugar futures edged up 0.26 cent to 18.82 cents per lb at 1451 GMT, having earlier touched a three-year high of 18.91 cents per lb.

Raw sugar prices hit a 25-year peak of 19.73 cents in February 2006. A rally beyond 20 cents would be the highest on the monthly charts for sugar in 28 years.

London's front month white sugar contract went up $8.00 to $494.00 per tonne, having touched a three-year peak of $494.50 earlier.

S.L. Jain, a leading figure in the global sugar industry, said on Thursday he had retired as director-general of the Indian Sugar Mills Association (ISMA) and added that a successor had not yet been appointed.