NEW DELHI: Sugar buyers in India, the world’s biggest user, may renegotiate some import contracts as a decline in domestic prices to a four-month low makes overseas purchases unprofitable, according to Newedge USA.
“With the rapid fall in the market, chances of this type of activity occurring have increased,” Michael McDougall, a senior vice-president at the brokerage, said in a telephone interview.
“The market is not moving in their favour and is moving against them.” Reworking contracts or possible defaults by buyers in India may pressure global prices that have dropped 28% from the three-decade high reached February 1. India has contracted to import 5.9 million tonne in the season started October 1, more than double the quantity bought last year, and needs an additional 1 million tonne, according to the Indian Sugar Mills Association.
“It’s possible that a substantial part of the white sugar contracted in the past two-three months could either be diverted or cancelled or renegotiated ,” said Narendra Murkumbi, managing director of Shree Renuka Sugars, India’s biggest importer. “The quantity could be 200,000 tonne.”
Raw-sugar futures for May delivery gained 0.5% to 21.78 cents a pound in after-hours trading on ICE Futures US in New York. Prices dropped 8.2% this week before Friday after slumping 21% last month. “Some people that have purchased at prices that are above current prices will be less likely to buy anything additional despite the fact that the market is cheaper,” McDougall said. “They have certainly seen an increased risk in the sugar that they have purchased.”
Sugar prices dip further on heavy offloading by stockists
MUMBAI: Sugar prices extended its fall at the Vashi wholesale market on Friday on the back of heavy stockists offloading amid restricted consumer demand. Meanwhile, the agriculture minister Sharad Pawar on Thursday said that the country’s sugar output is likely to improve substantially during current season.
Medium sugar quality (M-30 ) shed Rs 70/100 per quintal to Rs 3,210/3,290 from Thursday’s closing level of Rs 3,310/3,360. The country may see its sugar output rise to 17 million tonnes this season against the earlier estimate of 16 million tonnes on higher cane yield, a senior government official said on Friday.
“The country can certainly produce more than the official estimate of 16 mt. About 17 mt of sugar production is possible in the current season (2009-10 ),” the official said.
Source : The Economic Times