The price of raw sugar has increased to its highest level since 1981, as supply concerns grow.

Raw sugar futures added 3% on Monday, to finish the day at 22 cents a pound.

"The main problem is a deficit in sugar supplies," said Nick Penney, a trader with Sucden Financial, a firm that focuses on sugar trading.

Growing demand in Brazil for sugar to be turned into ethanol, coupled with a sharp fall in Indian production, have both prompted worries, he explained.

Sugar production in India for 2008-09 fell 45% year-on-year, according to a report by Sucden.

And a "drastic fall" is expected for the coming Indian crop, it said.

India had less rain in the monsoon season and it was also uneven, damaging a number of agricultural crops.

There are concerns that the pending sugar crop, which will be ready around November, will be inadequate.

"This [sugar market] train is running express," said Alex Oliveira, senior sugar analyst for Newedge USA in New York.

"It's feeding on itself."