Sugar drops to 6-1/2 month low on poor demand, supply
Category: Sugar
(The Economic Times) – Sugar futures extended losses on Friday to their lowest in six-and-a-half months on sluggish demand and rising supplies from local production and cheaper imports of raw sugar.
At 1024 GMT, the key February sugar contract on India’s National Commodity and Derivatives Exchange was down 1.38 per cent at Rs 3,145 ($59.12) per 100 kg, after hitting a low of Rs 3,097, a level last seen on July 13, 2012.
Sugar edged down by Rs 7 to Rs 3,243 per 100 kg in the Kolhapur spot market in the top-producing Maharashtra state.
“Mills are slashing quotes, but still demand is weak. That is putting pressure on mills to reduce prices further. They need money to make outstanding cane payments,” said a Kolhapur based dealer.
Mills usually pay farmers a large chunk of the cane price immediately after harvest or within two weeks.
Demand for the sweetener from bulk consumers like cold drink and ice cream makers usually drops in India during the winter season.
Mills in India are expected to churn out 24 million tonnes of sugar in 2012/13, down from 26 million tonnes in the previous year, but higher than the expected local consumption of about 22 million tonnes.
“Rising imports of raw sugar are also worrying mills. Local prices are still very high compared to overseas prices,” the dealer said.
India has contracted to import 920,000 tonnes of raw sugar since the season began in October, turning into a net importer for the first time in two years despite surplus stocks at home, a senior industry official said.
India’s sugar output rose 3 per cent to 10.8 million tonnes in the first three-and-a-half months of the season beginning October.
