By Chanyaporn Chanjaroen Oct. 28 (Bloomberg) -- Sugar prices will remain above historical averages through June 2010 as supply falls short of demand, said Olivier Pairault, a portfolio manager at BlueGold Capital Management LLP. An increase in supply sparked by this year’s rally is only likely to take place around the end of 2010 because sugar cane takes about 18 months to grow, Pairault said today at the Jetfin Commo & Energy 2009 conference in Geneva. Rising prices have failed to curb use because sugar accounts for a low percentage of costs of food for which it’s an ingredient, he said. “Given the magnitude of stock drawdowns, prices will be high relative to historical standards through the first half of 2010,” said Pairault, who also has worked for Morgan Stanley and Cargill Inc. Curtailed production in India, the world’s second-largest producer of the sweetener, contributed to inventory use, he said. The country this year had its driest June in 83 years, and excess rainfall has hurt output in Brazil, the biggest producer. White, or refined, sugar has added 76 percent this year in London, and raw sweetener has almost doubled in New York. Investors will start expecting more supply in the middle of 2010, after which prices will decline, Pairault said. London-based BlueGold manages $1.5 billion, mostly in energy. Its hedge fund has returned more than 60 percent this year, according to Pairault. Hedge funds are mostly private pools of capital whose managers participate substantially in the profit from speculation on whether the price of assets will rise or fall.

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