Sugar futures tumble on Italy fears, India export outlook
Category: Sugar
(Forexpros) – Sugar futures fell sharply on Wednesday, as growing fears over Italy’s debt crisis and speculation of higher Indian export supplies dragged down prices.
On the ICE Futures U.S. Exchange, sugar futures for March delivery traded at USD0.2548 a pound during European afternoon trade, tumbling 2.58%.
It earlier fell by as much as 2.7% to trade at a daily low of USD0.2545 a pound.
Agricultural commodities continued to be affected by outside influences after the yield on Italian 10-year government bonds spiked to a euro-lifetime high of 7.48% earlier, a level widely viewed as unsustainable in the long-term.
Smaller euro zone nations Greece, Ireland and Portugal had to seek international bailouts once their borrowing costs rose above the critical 7%-mark.
The surge in yields came after clearing house LCH.Clearnet raised margins investors must provide to trade Italian debt.
The news saw risk aversion sharpen, boosting demand for the U.S. dollar. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rallied 1.23% to trade at 77.73.
Sugar prices came under additional pressure after India’s Agriculture Minister Sharad Pawar said earlier that Indian sugar production was forecast to total between 25 to 26 million tonnes.
Domestic consumption was estimated at 22 million tonnes, leaving the country with a significant surplus, boosting speculation that India will export more sugar.
“This is a golden time for India to enter the global market in a big way and get a better price, which will ultimately be provided to cane-growers,” Pawar said.
His comments follow remarks from the nation’s Food Minister K.V. Thomas on Tuesday, saying that an Empowered Group of Ministers, headed by Finance Minister Pranab Mukherjee will likely meet on November 16 and 17 to decide on allowing sugar exports this marketing year.
The government is yet to announce the export policy for the 2011-12 marketing year. The country had exported 2.6 million tonnes in the previous marketing year. India is the world’s second largest sugar producer, following Brazil.
Elsewhere on the ICE Futures Exchange, cotton futures for December delivery shed 0.59% to trade at USD0.9704 a pound, while Arabica coffee for December delivery dropped 1.3% to trade at USD2.2765 a pound.
