Indian sugar rebounds from 27-mth low on expectations of govt sops

(Reuters) – Indian sugar futures rebounded on Monday from their lowest level in more than 27 months hit last week on bargain-buying, driven by expectations that the government will give incentives to mills to produce raw sugar for exports.

At 0838 GMT, the key February contract was up 0.44 percent at 2,747 rupees ($44.35) per 100 kg on the National Commodity and Derivatives Exchange. It fell to 2,706 rupees last week, the lowest level since Sept. 29, 2011.

“It seems the government will approve subsidy for raw sugar production this week. The amount is important. It will decide whether exports are possible for mills,” said Mukesh Kuvadia, the secretary of the Bombay Sugar Merchants Association.

Ample supplies and a stronger rupee capped the upside.

The rupee rose on Monday. A stronger rupee trims exporters’ returns.

Temperature has fallen below normal in some parts of the country, the weather department said on Monday.

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

Indian mills usually pay farmers a large chunk of the cane price immediately after harvest or within two weeks. As demand is weak, some mills are making distress sale in the market to make cane payments, dealers said.

Spot sugar was down 12 rupees at 2,803 rupees per 100 kg at the Kolhapur market in Maharashtra.

India appears set to increase sugar exports to Asia and the Middle East if, as expected, the government extends production incentives to cash-strapped mills.