Indian sugar steady as surplus supply offsets festive demand

(Reuters) – Indian sugar futures were treading water on Monday as forecast of surplus production for a fourth straight year offset a slight improvement in demand due to a festival.

The key December contract was down 0.07 percent at 2,864 rupees ($46.50) per 100 kg on the National Commodity and Derivatives Exchange at 0751 GMT. It fell to 2,850 rupees on Oct. 21, its lowest level since June 13, 2012.

India started the new sugar marketing year with carry-forward stocks of 8.8 million tonnes. In addition, it is expected to produce 25 million tonnes this year, compared with a demand of 23 million tonnes.

“Demand has improved due to Diwali, but it is far lower than usual,” said Ashok Jain, president of the Bombay Sugar Merchants Association.

“Mills are desperate to sell old stocks. Many mills are floating tenders and continuously reducing prices.”

India will celebrate the Hindu festival of Diwali in the first week of November. Sugar demand from bulk consumers usually rises ahead of Diwali.

Spot sugar was down 9 rupees at 2,865 rupees per 100 kg at the Kolhapur market in the top producing Maharashtra state.

A pick-up in exports can help mills in trimming inventory and can support prices, dealers said.

Indian traders have struck deals to export about 175,000 tonnes of raw sugar for December-January delivery, marking their first sale in the new season that started on Oct. 1.

A dispute over sugarcane prices between Indian farmers and mills may curb sugar exports from the world’s second-biggest producer, delay crushing in the new season and even trigger bankruptcies.