Sugar, the best-performing commodity in the past 12 months, may beat bonds, stocks and oil for a second straight year.

“Sugar could quadruple from here and it would still be below its all-time high,” said former George Soros partner James Rogers, 63, who founded Lausanne, Switzerland-based Diapason Commodities Management SA, which oversees $3.5-billion (U.S.). “The rally hasn’t even started yet. And the fundamentals are changing dramatically in a positive way.”

Prices are soaring as record gasoline costs prompt Brazil, the world’s biggest sugar producer, to devote more than half of its crop to ethanol production to meet a goal of eliminating gas-fuelled cars in four years. A drought in Thailand, the second-biggest exporter, and a 50-per-cent rise in Chinese sugar demand in the past decade are compounding the supply squeeze.

“Sugar will definitely outperform bonds and equities this year, primarily because of supply constraints,” said Andreas Mayer, 39, who helps manage $130-million at Vienna-based Merit Alternative Investments GmbH and set up the Commodities Opportunities Fund two months ago.

Read more at Commodity Trader