Indian sugar futures snapped a five-day losing streak and rose on Monday as bargain hunting emerged on hopes for a pick-up in consumption in the coming summer months when demand from makers of cold drinks and ice creams rise. At 3:52 pm (1022 GMT), the March contract on the National Commodity and Derivatives Exchange was up 0.78 percent at 2,071 rupees ($39.8) per 100 kg, while the April contract had risen 0.86 percent to 2,119 rupees.
Still, the near-term outlook remains downbeat, analysts said. "The short-term outlook is bearish. Traders are worried that the government may take some steps to depress prices," said Veeresh Hiremath, an analyst at Karvy Comtrade Ltd. The government said last month it would impose limits on the amount of sugar that can be stocked by traders, a move aimed at reining in prices ahead of general elections in April and May, but is yet to lay out its plans.
If the government sets a very low ceiling, traders said it would lead to higher supplies in the spot market as firms trim excess stocks. Spot prices in the western state of Maharashtra, India's top producer, fell 0.55 percent to 2,073.75 rupees on excess supplies from February. India's government sets monthly and quarterly quotas that millers can sell freely in the market.
It released 1.5 million tonnes of free sale sugar for February and millers are now offloading unsold supplies from the allocation. India's farm minister said last month the country's output may be about 16.5 million tonnes, lower than earlier expectations of about 18 million tonnes and much below last year's estimated output of about 26.5 million tonnes. Trade estimates place output at 16 million tonnes.
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