Indian sugar futures fell on Friday to their lowest in nearly 16 months on surplus supplies that some industry officials fear would led cash-crunched mills sell the sweetener by cutting prices. A slight improvement in demand due to festivals limited the downside. India's carry-forward sugar stocks on October 1 were estimated at 8 million tonnes, up from 6.2 million tonnes a year earlier.
The key November contract was down 0.24 percent at 2,886 rupees ($47.16) per 100 kg on the National Commodity and Derivatives Exchange at 0917 GMT. It fell to 2,882 rupees on October 9, the lowest level since June 18, 2012. "Sugar mills in Uttar Pradesh desperately want to clear farmers' arrears. The only way for them is to sell sugar, but the market is already oversupplied. They may be forced to cut prices," said a Mumbai-based dealer.
Sugar mills in Uttar Pradesh, the country's second-biggest producer, owe cane farmers nearly 24 billion rupees for the previous crushing season ended on September 30, according to industry estimates. India will celebrate the Hindu festivals of Dussehra next week and Diwali in the first week of November. Sugar demand usually rises during this period. Spot sugar edged up 7 rupees to 2,910 rupees per 100 kg at the Kolhapur market in top producing Maharashtra state.
India's sugar output is expected to be 25 million tonnes in the new season that started on October 1, higher than the estimated demand of 23 million tonnes per annum, said a leading industry body. A jump in sugar refining capacity in Asia and Africa is set to help India boost exports of the raw variety and reduce the world's No 2 producer's bulging stocks.