Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hello, everybody and welcome to HardAssetsInvestor.com. I’m Mike Norman, your host. Well, sugar prices are at a 28-year high. Here to talk about that, making a return appearance on our show, is Jurgens Bauer, chief soft commodity analyst at PitGuru.com and birthday boy today. How are you doing? Happy birthday, by the way.

Jurgens Bauer, chief soft commodity analyst, PitGuru.com (Bauer): Thank you, I appreciate that.

Norman: I hope somebody gave you some sugar as a present and not in a birthday cake, but maybe a big sack of it or some contracts a few months back. What’s going on?

Bauer: Well, the price of sugar has gone up significantly; we’re at a 28-year high.

Norman: Has everybody suddenly developed a sweet tooth, or what is the underlying real reason for this?

Bauer: The underlying real reason for this is simply because we’re going to be in a deficit globally. The supply/demand typical fundamentals: Supply is a lot less anticipated than what we expected, and the demand continues to grow at a rapid pace.

Norman: Now what kind of demand are you talking about? Because this constantly comes up, and I’ll tell you why I’m a skeptic. I’m a skeptic because the economy, globally, is terrible. We have in this country 13 million people out of work. Is that their fix now? No. But let’s face it: This is investment demand, isn’t it?

Bauer: You’re absolutely right in a portion of it, Mike, as we talked about a little bit before, as we were chatting about the hoarding and things of that sort. However, you really do have the emerging economies of the world, like India and China, One of the first things people will do as they put money in their pockets, is they’re going to improve their diet.

Norman: That’s an improvement?

Bauer: Well, hey.

Norman: I know what you’re saying: More refined foods.

Bauer: Exactly. Most of the packaged foods that you see, you go to any store, grab an item off the shelf, a lot of the packaged foods or processed foods are going to have sugar in them. Yes, they may have corn syrup, something of that sort, but that’s one of the reasons – the supply.

India – which typically has monsoon rains that they depend upon to nourish the crop with moisture – they didn’t get the type of moisture that is typical. And then on the other hand, Brazil – which is a huge producer – they’re getting rains, but they’re getting rains at the wrong time. And so the two in combination … there’s going to be a shortage in meeting the demand on a global scale, and then of course you get the influx of the speculators.

Norman: I want to get back to the real fundamentals of the supply and the demand – the physical side – but is there one of these ETFs for sugar like you see with the gold, like you see with the oil? Is there a way to play that, a similar vehicle?

Bauer: Yes. I’m not a real follower of that because I deal with the actual commodity market itself and the option market. But there’s ETFs in everything today, Mike, and sugar would be no exception. I can’t give you the symbol for it, there’s probably several. I will tell you this, though. I know where you’re going is that type of additional speculation on the price … those forces are at work certainly. And of course, when you see something that goes to a new 28-year high, a lot of people jump on that because it’s a high.

Norman: What price are we talking about now? We’re in the 20 cent handle.

Bauer: It’s quite interesting. We ran up to 23, 22 cents in the October, which is the most active, and the front-month contract last Wednesday. Then it backed off and it was very healthy for the market. A lot of the soft markets, the markets that I trade, on Thursday of last week, cotton was at 65.5 cents briefly and then backed off; more than backed off, dropped pretty sharply. A lot of folks thought it was a key reversal, which wasn’t evident until the next day, when it went a limit down.