Even if sugar – despite widespread public belief to the contrary – won’t wreck your car’s engine because it doesn’t dissolve in hydrocarbons like gasoline, it can still clog your fuel filter and bring your vehicle to a grinding halt. But that hasn’t stopped millions of cost-conscious South American motorists from enthusiastically pumping the sweet stuff into their tanks at 29,000 filling stations across Brazil.

That’s because ethanol can be made from sugar, and in Brazil, the world’s leading producer and exporter of both, ethanol is actually now cheaper than gasoline. Brazil exported over $600 million worth of ethanol in 2005, and more than 70% of new autos sold in the country are “flexible fuel” (flex-fuel), capable of running on gas, ethanol or any combination of both. At the time of the Arab oil embargo in 1973-74, Brazil imported 80% of its fuel. When petroleum prices quadrupled in a span of several months, the nation’s economy plunged into deep recession. Now, while the U.S. still imports 60% of its crude, Brazil is poised to become energy self-sufficient.

Last year, we said of sugar in the new Market Scope Update, “The probabilities are looking like we could see higher prices into January,” and sugar prices recently surged to their highest levels since 1981. World raw-sugar futures for March closed at 18.48 cents per pound on Thursday, January 26 on the New York Board of Trade (NYBOT), and the cash price hit 19.49. With crude oil prices hovering near their record, ethanol demand remains a driving force. A disappointing harvest last month in Brazil, reduced European production and a drought that struck Thailand and other Asian growers has contributed to a sugar supply shortage. The International Sugar Organization (ISO) recently projected that global sugar consumption in 2005-06 will exceed output by up to 2 million tons.

The price of sugar has more than tripled in the last 2 years. This commodity is notorious for making breathtakingly dramatic moves. From September 13, 1968 to November 21, 1974, sugar rose 50-fold, from little more than a penny to 66 cents. The vast bulk of the gain came in the final year. After Christmas of 1973, sugar doubled in under 2 months, took a frightful 24% spill in just 9 days, then rose almost 300% in 8 months. In the worst stock market year since the Depression, sugar’s staggering advance ignited a merger mania in the industry, and Great Western Sugar rose 600% in 1974 on takeover rumors.

That kind of volatility spells extraordinary opportunity, and we foresee a situation unfolding in the near future offering an exceptional chance for profit.
Sugar is only one of 28 different markets we follow carefully in Market Scope Update, our timeliest and most comprehensive service. Our research team continuously monitors and analyzes fast-changing conditions in sugar and other markets and reports them exclusively to our online subscribers 3 times a week. For a really sweet deal,

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About the Author:

James Flanagan is the president and founder of Gann Global Financial. In 1978, while majoring in economics at Claremont McKenna College, he acquired his first book written by W.D. Gann, “How to Make Profits Trading in Commodities.” This set in motion his passion to validate the claims of this early pioneer of market psychology and technical analysis. In April 1990, he launched his first newsletter Past Present Futures which has been in continuous publication since that time. James Flanagan oversees all of the research and research development at gannglobal.com.