WHAT'S THE LINK BETWEEN THE AUTO INDUSTRY AND SUGAR FUTURES?

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Author: Watson, Thomas

ONE QUESTION

Environmentalists hate SUVs. But investors may find fuel hogs rather sweet down the road.

On Feb. 8, after President Bush called for investment in fuel alternatives, General Motors and Ford announced plans to promote flexible-fuel vehicles running on gas and ethanol. Ethanol can be made from a variety of agricultural products. But Brazil, the world's top ethanol maker, uses more than 50% of its sugar cane crop to produce it.

Thanks to the hype, sugar futures were trading at 25-year highs in early February. Some industry watchers see a bubble. But supplies are already tight, thanks to bad weather--and prices remain well below levels seen in the early '80s. That's why some candy companies are predicting a sugar crunch this year.

Environmentalists may be smiling. But consumers could soon see higher prices when filling up on treats.

PHOTO (COLOR): Bill Ford's new fuel?

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By Thomas Watson