NEW YORK (TheStreet) -- Raw sugar futures were surging Tuesday morning as long speculators held onto their positions on evidence that China's economic engine continues to run full pace.

Raw sugar for July delivery was rising 3.7% to 21.74 cents a pound, extending the gains from the previous day.

China reported a better-than-expected trade surplus of $11.4 billion in April from $1.687 billion a year ago, on a jump in exports.

Although inflation concerns have placed China on the sidelines of the sugar market, "look for them to become active importers of sugar over the coming months," PFG Best Senior Research analyst Robin Rosenberg remarked.

Long liquidation on sugar, driven by expectations of adequate supply, has weighed the commodity down over 16% year to date, big long positions remain in place.

The most recent Commitment of Traders Report shows large non-commercial traders holding a net-long position of 118,862 contracts as of April 26th -- much less than the record-long positions seen in 2008, but nevertheless a large position, say optionsXpress analysts Mike Zarembski and Rob Kurzatkowski.

Although Brazil, the top sugar producer, is expecting prolific sugar harvests in 2011 to 2012, the Brazilian Sugarcane Industry Association -- in conjunction with the Center for Sugarcane Technology (CTC) and other sugar and ethanol producer associations in South-Central Brazil -- cautions that the average productivity in the south-central region could still be hurt due to aging cane fields, a reduction of sugar cane that has been growing for nearly two years to less than 3% of the total planted area this harvesting year versus 14% this past year, and unfavorable weather.

In India, sugar production rose 21.8% to 22.6 million tons in October through April over the same time last year, according to a PFG Best report. Meanwhile, research company F.O. Licht reports that there's a strong possibility Thai sugar exports will hit an all-time-high of 7 million tons this year.

Food and drink stocks were mostly trading higher. Kraft Foods ( KFT) was rising 0.4% to $34.16, The Hershey Company ( HSY) was adding 1.1% at $56.46, Magnum chocolate maker Unilever ( UL) was rising 1.5% to $32.83 and PepsiCo ( PEP) was up 0.2% at $69.93.

Pepsi rival Coca-Cola Company ( KO) was up 0.4% at $67.23 and smaller peer Dr Pepper Snapple Group ( DPS) was trading sideways at $39.39. Natural soda company Hansen Natural Corporation ( HANS) was falling 0.1% to $65.44.

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-- Written by Andrea Tse in New York.

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