(Bloomberg) – Raw sugar fell in New York as an export subsidy approved by India, the world’s second-biggest producer, may push more sweetener onto the world market and damp imports by the nation’s refineries. Cocoa retreated.
India’s cabinet approved a subsidy of 3,333 rupees ($53.38) a metric ton on raw sugar shipments for February and March and will review the amount in April, an official, who asked not to be identified because he isn’t authorized to speak to the media, told reporters in New Delhi yesterday. Shree Renuka, which owns refineries in India, will boost local purchases of raw sugar to turn it into the refined variety after the subsidy, said the company President Ravi Gupta. That may reduce the nation’s import demand.
“The measures are likely to result in more sugar being placed on the market,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in an e-mailed report. “The additional supply from India is likely to preclude any recovery of the world market price to beyond the 16 cents a pound mark.”
Raw sugar for delivery in May slid 0.9 percent to 15.97 cents a pound by 7:46 a.m. on ICE Futures U.S. in New York. Trading volumes were more than double the average for the past 100 days for this time of day, according to data compiled by Bloomberg. White, or refined, sugar for delivery in May fell 1.2 percent to $441 a ton on NYSE Liffe in London.
India may produce 1.2 million to 1.5 million tons of raw sugar in the year to Sept. 30 if the subsidy is extended beyond March, according to Shree Renuka. While raw sugar exports may reach 800,000 tons this season, the remainder of the output will be absorbed by local refineries if subsidies continue, Gupta said.
Substitute Imports
“The incentive will surely help in reducing the sugar surplus in India,” said Gupta. “India is quite well positioned to substitute raw imports by refiners with domestically produced raws.”
Arabica coffee for May delivery fell 1.2 percent to $1.414 a pound on ICE. Earlier, the price touched $1.4475, the highest for a most-active contract since May 15. Robusta coffee for May delivery was unchanged at $1,818 a ton NYSE Liffe.
Goldman Sachs Group Inc. raised its price forecasts for arabica coffee futures traded in New York to $1.30 a pound for three, six and 12 months from a previous estimate of $1.20 a pound, the bank said in an e-mailed report today.
The forecasts are below current prices and below the forward curve partly because high stockpiles after several years of surpluses will help cushion potential production drops in Brazil, the bank said. It sees risks to its current estimates as skewed to the upside, it added.
Cocoa for delivery in May slid 0.3 percent to $2,963 a ton in New York. Cocoa for delivery in March fell 0.5 percent to 1,861 pounds ($3,095) a ton in London.
