Indian sugar futures climbed to hit new contract highs on Monday tracking a surge in spot market, where ice-cream and cola makers increased purchases amid lower output estimates. "Spot prices were responding to strong summer demand from cold drink makers," said Ajitesh Mullick, an analyst at Religare Commodities Ltd.
"Lower output estimates were fuelling the upside further." Indias sugar output will fall to 14.2 million tonnes in 2008/09, down 8.4 percent from previous estimates, as lower cane availability forced mills to end crushing earlier than expected, a top trade official said last week. Spot prices in the western state of Maharashtra, Indias top producer, jumped 5.2 percent to 2,378.3 rupees.
Spot prices have been moving unilaterally in upward direction for last few weeks triggering buying activity from stockists, who want to cash in on, said Ashokkumar U. Jain, president of the Bombay Sugar Merchants Association. At 2:45 pm (0915 GMT), the April contract on the National Commodity and Derivatives Exchange was up 2.74 percent at 2,288 rupees ($46.4) per 100 kg, after hitting a new high of 2,308 rupees.
The benchmark May contract rose 2.62 percent to 2,386 rupees. However, a likely increase in supplies from white-sugar imports capped gains, traders said. Indias Election Commission has approved a government proposal to allow tax-free imports of white sugar, the trade secretary said on Monday. Indias cabinet last week decided to remove a 60 per cent import tax on up to 1 million tonnes of whites for the next four months and also waived a condition to export whites in lieu of duty-free purchases of raws.