Indian sugar futures drop on higher supplies

Indian sugar futures fell on Tuesday as a stronger rupee and a drop in overseas prices are likely to lead to higher imports in the coming months, though summer season demand capped the downside. The most-active sugar contract for May delivery on India’s National Commodity and Derivatives Exchange was 0.68 percent down at 2,940 rupees per 100 kg at 0921 GMT. 

“Sugar prices are consistently falling in the world market. Now rupee is also rising. This will lead to higher imports. There is healthy margin for raw sugar refiners,” said a Mumbai based dealer. “Local production is more than demand. In such situation additional supplies from imports would depress prices,” the dealer said. 

New York raw sugar futures fell 1.3 percent on Monday to settle at 17.79 cents per lb. The front-month contract hit a two-and-a-half year low of 17.47 cents on April 3 on expectations of steep global output. A strong rupee makes imports of the sweetener cheaper. Spot sugar nudged down 5 rupees to 3,062 rupees per 100 kg in the Kolhapur market in top-producing Maharashtra state. 

Demand for sugar from ice-cream and beverage makers typically rises during the summer. A severe drought in top sugar producing Maharashtra state has been affecting new plantation and is likely to affect on sugar production in the crop year starting from October 1, 2013. India is likely to produce 24.6 million tonnes of sugar in 2012/13, an industry body had said, against an annual demand of about 23 million tonnes. 

Copyright Reuters, 2013

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