Sugar hits 7-month low on sluggish demand

MUMBAI: Sugar futures extended losses on Tuesday to hit their lowest in seven months as demand remained sluggish despite a modest cut in prices from millers struggling to make cane payments.

At 1012 GMT, the key February sugar contract on India's National Commodity and Derivatives Exchange was down 0.1 per cent at 3,064 rupees ($57.53) per 100 kg. It dropped to 3,050 rupees earlier, a level last seen on July 11, 2012.

Spot sugar fell 2 rupee to 3,226 rupees per 100 kg in the Kolhapur market in top-producing Maharashtra state.

"Mills are gradually cutting prices in tenders, but still demand is weak. Weather is cold. Unless temperature starts rising, demand will remain subdued," said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association.

"Mills are under pressure. They need money to make cane payments, but demand is poor."

Demand for the sweetener from bulk consumers like soft drinks and ice cream makers usually drops in India during the winter season.

Mills usually pay farmers a large chunk of the cane price immediately after harvest or within two weeks.

"Supplies are rising as crushing is progressing well in Maharashtra and Uttar Pradesh," Kuvadia said.

India's sugar output rose 3 per cent to 13.8 million tonnes on year in the first four months of the season beginning October 2012, a leading industry body said on Monday.

Mills in India are expected to churn out 24.3 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.

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.