India, the world’s biggest user of sugar, will extend the seven-month ban on futures trading in the commodity beyond December to keep prices from rising because of a shortfall in supplies, the Forward Markets Commission has said.
The regulator would assess prospects for the 2010-11 sugar cane crops globally before making a decision to lift the curb, BC Khatua, chairman of the FMC, told reporters at an edible oils conference in Mumbai today.
Sugar has almost doubled this year, reaching a 28-year high on September 1 in New York, as a drought in India and excess rain in Brazil, the top producers, ravaged crops. The South Asian nation will remain the largest buyer with a shortfall of eight million tonnes in the 2009-10 season, Czarnikow Group Ltd. said this month.
“It looks difficult to restore the futures in December,” said Khatua. “We would rather be overcautious.”
India, expected to import six million metric tonnes this year, may have to rely on imports to meet almost a third of its total demand of 23 million tonnes in the year starting October 1, Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd., the country’s biggest refiner, said on September 1.
The weakest monsoon rainfall since 2002 has caused drought in half the South Asian nation, damaging crops of cane, rice and oilseeds. Sugar production may total 16 million tonnes in the year starting October 1, the government and producers have said. Output this year is expected to slump 44 per cent to 15 million tonnes.
Duty-Free Window
To alleviate the shortage, the country will permit duty-free imports of refined sugar until May or June, extending an earlier exemption, Agriculture Minister Sharad Pawar has said. Last month, the duty-free window was widened to November 30 for refined sugar and until March 31 for raw stock.
“The reasons that led to the ban on futures trading still exists,” said Khatua. “It is clear we will continue to have a shortage” of sugar, he said.
Raw-sugar futures for March delivery rose 0.25 cent, or 1.1 per cent, to 23.17 cents a pound on ICE Futures U.S. in New York yesterday. Prices have jumped 96 percent this year, reaching a 28-year high of 24.85 cents on September 1.
Demand from other nations, including Russia, Pakistan, Egypt, Indonesia and Japan, will help support prices before Brazil’s next harvest.
