Indian sugar drops on weak demand; govt moves watched

(Reuters) – Indian sugar futures fell on Monday on sluggish demand from bulk consumers and ample supplies, though a delay in cane crushing and expectations of an increase in import duty limited the downside.

The key December contract was down 0.80 percent at 2,844 rupees ($45.22) per 100 kg on the National Commodity and Derivatives Exchange at 0947 GMT. It fell to 2,801 rupees last week, its lowest since June 8, 2012.

“Bulk buyers are not active. Retail demand is also weak. That’s why despite the delay in cane crushing, prices are not able to rise,” said Ashok Jain, president of the Bombay Sugar Merchants Association.

Demand for sugar from bulk consumers like ice-cream and cold drink makers usually drops during winter.

“The industry is expecting the government will do something to support sugar prices. It can do it by raising import duty or by giving subsidy for sugar exports,” Jain said.

Sugar cane crushing normally starts in the first week of November in Maharashtra and Uttar Pradesh, the country’s top two producing states. But this year it has been delayed as farmers and mills could not reach an agreement over the cane price.

Most sugar mills in India are likely to remain idle for at least the next two weeks – extending a delay in the start of crushing – after the government refused to be drawn into a price dispute.

India started the new sugar marketing year with carry-forward stocks of 8.8 million tonnes. It is expected to produce 25 million tonnes this year against a demand of 23 million tonnes.

Spot sugar edged up 5 rupees to 2,891 rupees per 100 kg at the Kolhapur market in Maharashtra.