Indian sugar futures climbed on Monday after an industry official forecast the output in the coming year to drop sharply due to inadequate rains and diversion of cane for fodder.
Sugar output in Maharashtra, India's top sugar producing state, should fall more than 37 percent to 5.7 million tonnes in the year beginning in October from this year's estimated output of 9.1 million tonnes, the managing director of a state co-operative federation told Reuters.
The forecast was lower than an earlier estimate of 6.8 million tonnes. At 2:04 pm (0834 GMT), the September contract was up 0.88 percent at 1,719 rupees ($40.5) per 100 kg, while the August contract rose 1.09 percent to 1,669 rupees. Spot prices in Maharashtra rose 0.62 percent to 1,677.5 rupees.
"Estimates of lower output in Maharashtra next year will keep the prices firm in the medium term, but the overall direction will be clear only after the quota for August is announced," Lopa Sanghvi, an analyst in Anand Rathi Commodities Ltd, said. India is estimated to produce about 27 million tonnes of sugar in the current year ending in September, and the output in the next season is seen at 21-22 million tonnes.
The federal government, which controls the sector, has set millers a sales quota of 3 million tonnes in the quarter ending September, including 900,000 tonnes each in August and September, down from 3.6 million tonnes in the same period last year. But considering recent spurt in prices and festival demand expected to kick in from later this month, the government could increase the quota, analysts said.