Indian sugar futures hit an 11-day high on Monday on expectations of higher buying by stockists and concerns over output of the sweetener in the top-producing Maharashtra state due to a drought, though ample supplies restricted the upside.
The key July contract on the National Commodity and Derivatives Exchange was up 1.14 percent at 3,095 rupees ($53.34) per 100 kg at 0848 GMT, after rising to 3,104 rupees, the highest level since May 23. "In coming days stockists will become active. Monsoon has already covered southern Kerala state. Transportation of sugar in remote parts becomes difficult in rainy season," said Prasoon Mathur, a senior analyst with Religare Commodities.
"Stockists usually build up inventory ahead of peak rainy season," Mathur said. India's crucial monsoon arrived on cue in Kerala on the southern coast on Saturday, a top weather official said. Spot sugar nudged up a rupee to 3,052 rupees per 100 kg at the Kolhapur market in Maharashtra state. Demand for sugar from ice cream and beverage makers typically rises during the summer, although this year it was lower than expected, dealers said.
Sugar cane is a perennial, water-intensive crop and is usually harvested 10 to 16 months after planting. Cane for the crushing season starting October 1 has been planted, but half the total acreage is short of water. India is likely to produce 24.6 million tonnes of sugar in 2012-13, an industry body has said, against an annual demand of about 23 million tonnes.
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