India sugar rises on extra time to sell Aug stocks

(Reuters) – Indian sugar futures extended gains on Tuesday, bolstered by the government’s decision to provide additional time to sell the August quota and on robust demand in the spot market ahead of key festivals.

The Indian government has provided an additional 10 days to sugar mills to sell around 200,000 tonnes of unsold non-levy sugar stocks of August, a government statement said on Tuesday.

“The extension gave millers relief. Ten days window period is sufficient to sell 200,000 tonnes of sugar as demand is good due to festivals,” said an official at the Bombay Sugar Merchants Association.

Indians will celebrate the Ganesh festival this month, followed by Dussehra in October and Diwali in November. Sugar consumption usually rises during the festival period.

The key October contract on the National Commodity & Derivatives Exchange was up 0.75 percent at 3,633 rupees ($65.42) per 100 kg at 0854 GMT, after rising to 3,637 rupees earlier in the day.

In the Kolhapur spot market in top producing Maharashtra state, sugar rose by 42 rupees to 3,622 rupees per 100 kg.

A likely drop in the country’s sugar output in 2012/13 marketing year starting from October also underpinned sentiment, dealers said.

Sugar output in Maharashtra is likely to fall by 30 percent year-on-year to 6.3 million tonnes in 2012/13 on poor cane yields due to drought and diversion of the crop for fodder, a state official said.

Indian sugar exporters are in talks to cancel sales of more than 500,000 tonnes of white sugar after domestic prices surged and buyers found cheaper supplies from competitors Brazil and Thailand, four trading sources told Reuters last week. ($1 = 55.5350 Indian rupees) (Reporting by Rajendra Jadhav; Editing by Sunil Nair)