Hurricane Dean's big winner: sugar?

As Hurricane Dean rips through the Caribbean and now Mexico, commodity traders who made contrarian bets on sugar--futures contracts for the commodity are down some 20 percent this year--are licking their lips:

While there's a projected surplus of 11 million metric tons of the sweetener, bad weather may cause the global stockpile to shrink, said Greg Smith, founder of Global Commodities Ltd. in Adelaide, Australia, manager of a $210 million commodities fund.

"The risk is now mostly in the upside as wild weather season approaches,'" said Smith, who said storm damage may send sugar prices doubling to 20 cents a pound, from 9.4 cents a pound as of Aug. 17 on the Nybot. "We consume a lot of sugar both for food and now energy, while unfortunately the weather patterns are becoming more extreme.''

The storm has wrecked sugar crops in places like Belize and Martinique, and may cause damage in Mexico. Still, there's reason to be skeptical of Smith's optimism. The economies of sugar-producing countries in the Caribbean depend heavily on sugar, but they're still only a small piece of the global trade. Brazil, Thailand, and India, some of the world's largest producers, are expecting bumper crops this year. And with India looking to dump excess sugar on world markets next year, the contrarians may be in for a bitter financial harvest in 2008. So far, the futures markets look unshaken by Hurricane Dean. Prices for Caribbean rum, however, could well skyrocket. Bad news for Jimmy Buffet.