SINGAPORE (Commodity Online): Global commodities investor Jim Rogers no longer loves gold. Instead, he is going to shift focus to commodities like sugar.

On gold, he says: "If it goes down I'll buy some more, and if it goes up I'll buy some more. I periodically buy some gold. I don't have a method to it. I just buy it."

Rogers is these days bullish on sugar. Sugar prices are rising dramatically these days. Last week, the price of sugar breached the 21 US cents per pound mark for the first time since 1981. It is up 80 per cent this year alone, and many believe it is set to go way higher.

Rogers says sugar prices might reach the all-time peaks it hit in the 1970s – 70 per cent higher than it is now.

Eugen Weinberg, an analyst at Commerzbank, says that net long positions on sugar contracts traded on the New York Board of Trade are running at four to five times their normal levels, at more than 200,000 tonnes. "This situation hasn't been observed in years. I think we are seeing a combination of very important fundamental factors and the price being driven by speculative interest," he said, adding that hedge funds, cash-rich and looking as ever for profit opportunities, might have developed a taste for sweet things.

The International Sugar Organisation agrees. "There is a lot of speculation there," said Leonardo Bichara Rocha, an economist with the ISO in London. "This year's deficit – the difference between supply and demand – is running at 7 to 8 million tonnes, and next year it will be between 4 and 5 million tonnes. India has seen a massive drop in production. The harvest in Brazil has been good, though they have had heavy rain there. In China there have been weather problems, but the issue there and elsewhere is the lack of real investment. Sugar is not a lucrative crop compared with using the land and people to make consumer or industrial goods. Also, there is a shortage of water in China and no new land to exploit for sugar production." He said it might take between 18 months and two years for supply to respond.

In an interview to interview with CNBC-TV18, Rogers had to say the following:

"Government are spending huge amounts of money, so the people getting the money think things are better and they feel better."

Is it going to last? I would suspect not. I am sure we will have more problems again and again in 2010-2011 because this is just papering over the problems, it is not solving the problems.

Answering a question about the direction of commodities in view of their recent good run, Rogers said some commodities obviously will have to pause others will continue to rise as nothing goes straight up.

"As far as I can see, the only sector of the world economy where the fundamentals are improving are commodities. Many farmers cannot get loans for fertilisers even though agricultural inventories are the lowest in decades. Nobody can get a loan to open a mine; it takes ten years to open a mine, so mine reserves continue to decline. So the fundamentals for commodities continue to improve and that is the best place to invest."

Speaking about agricultural commodities, Rogers singled out sugar and the historical low level of food inventories.

"I am certainly expecting sugar to go much higher during the course of the bull market over the next several years," Rogers said.

"Now Asia is prospering and there are 3 billion people trying to have a better life and most people when they get more prosperous, use more sweets. So you have big elements of demand in sugar now," he added

"Food inventories are at the lowest they have been in decades – not lowest in months or years but in decades."

"If we start having serious weather problems around the world as we have had many times in history, the price of food is going to skyrocket because there are no inventories and there is no productive capacity," Rogers said.