India sugar drops on selling pressure, higher quota

Indian sugar futures fell on Monday as the market reeled under selling pressure after the government asked mills to sell more in the open market, dealers said on Monday.

* Mills also sold extra quantities to improve their cash flows ahead of the new season when sugar companies need to pay farmers for cane purchases, dealers said.

* The key December contract on India’s National Commodity and Derivatives Exchange closed down 0.18 percent at 3,309 rupees ($60.25) per 100 kg.

* At the Kolhapur spot market in the top sugar producing Maharashtra state, sugar closed flat at 3,450 rupees per 100 kg.

* “It’s the start of the season and mills need liquidity to buy cane from farmers and, therefore, there i s some selling pressure,” said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association.

* Higher allocation by the government also put downward pressure on sugar, Kuvadia said.

* The government has asked millers to sell 4 million tonnes of sugar in the open market during October and November, higher than the average monthly allocation of around 1.7 million tonnes.

India’s sugar output in the 2012/13 crop year, which started on Oct. 1, is likely to fall to 23.5-24 million tonnes from 26 million tonnes a year earlier.

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