Indian sugar futures erased morning gains and fell on Monday afternoon, as profit-taking emerged after prices had jumped 5 percent last week and on market talk the government may step in to curb prices. At 2:27 pm (0857 GMT), the benchmark September contract was down 1.44 percent at 1,843 rupees ($42.6) per 100 kg.
The current month contract, which expires on August 20, fell 0.11 percent to 1,842 rupees. However, spot prices in Maharashtra, the country's biggest sugar producing state, edged up 0.37 percent to 1,897 rupees. "This is a temporary correction. Prices in the spot and futures should rise in the coming days," Amol Tilak, an analyst in Kotak Commodity Services Ltd, said. An expected drop in sugar output in the crop year ending September and robust retail demand due to festivals over the next two months should underpin the market, he said.
The government, which controls the sector, had released 900,000 tonnes for sale in the open market in August, lower than expected demand for 1.6-1.7 million tonnes. It later released another 200,000 tonnes, but the move failed to halt rising prices. London-based merchant Czarnikow on Friday forecast a 3.3 million tonne global deficit of sugar in 2008/09, compared with a surplus of 9.4 million tonnes in 2007/08.