MUMBAI: Indian sugar futures hit a contract low on Wednesday on sluggish demand and as a sharp drop in overseas prices raised hopes of higher imports of raw sugar in the coming months.
Raw sugar prices in New York settled close to two-and-a-half-year lows on Tuesday as speculative investors and traders continued to sell the sweetener amid concerns about a growing surplus following forecasts of a record crop from Brazil, the world's biggest producer, in 2013/14.
At 0915 GMT, the key February sugar contract on India's National Commodity and Derivatives Exchange was down 0.59 percent at 3,211 rupees ($59.67) per 100 kg, after hitting a low of 3,208 rupees.
Sugar edged down by one rupee to 3,262 rupees per 100 kg in the Kolhapur spot market in the top-producing Maharashtra state.
"The current difference between local and overseas prices is enough to prompt mills to place new import orders. Local production is more than demand. In such a situation imports would put downward pressure on prices," said a Mumbai-based dealer.
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.
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.
India's sugar output rose 3 percent to 10.8 million tonnes in the first three-and-a-half months of the season beginning October, a leading industry body said on Thursday.
Demand for the sweetener from bulk consumers like cold drink and ice cream makers usually drops in India during winter.
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