Sugar flat as sluggish demand weighs

MUMBAI: Indian sugar futures were treading water on Friday as rising supplies and subdued demand outweighed hopes the government will give mills flexibility in selling the sweetener in the open market.

As of 0854 GMT, the key January contract on India's National Commodity and Derivatives Exchange was down 0.18 per cent at Rs 3,296 ($60.55) per 100 kg. The contract was trading in a narrow band of Rs 3,296 to Rs 3,303.

"The winter season is saddening demand. Bulk consumer, retail buyers are cutting purchases," said Ashok Jain, president of the Bombay Sugar Merchants Association. "But mills are not slashing prices as their production cost has risen due to an increase in cane prices."

Demand for the sweetener from bulk consumers like cold drink and ice cream makers usually drops in India during the winter season. Sugar nudged down Rs 3 to Rs 3,333 per 100 kg at the Kolhapur spot market in top-producing Maharashtra state.

Food Minister K.V. Thomas on Thursday said the government will soon start fixing open market quota for sugar for six months. Currently the quota has been fixed for four months. The allocation of quota for six months would give mills more flexibility in selling sugar and could harden prices, dealers said.