Sugar Slumps on India Export Outlook, China Buying Supports.

Forexpros - Sugar futures declined on Tuesday, after India approved an additional one million tonnes of sugar exports in the current marketing season, while speculation of strong Chinese demand for the sweetener underlined prices.

On the ICE Futures U.S. Exchange, sugar futures for March delivery traded at USD0.2395 a pound during European afternoon trade, retreating 0.45%.

It earlier fell by as much as 0.7% to trade at a daily low of USD0.2386 a pound. Prices dropped to a five-month low of USD0.2272 a pound on November 25.

India's Ministry of Foods on Monday gave final approval for an additional one million metric tons of sugar exports in the 2011-12 marketing season, which began October 1.

The decision came as the country expected a sugar surplus of between 3.0 million and 4.0 million tons in the current marketing year. The increase in exports will bring total Indian sugar shipments to a four-year high.

According to the Indian Sugar Mills Association, Indian mills have produced approximately 2.16 million tons of sugar since October 1, up 17% from 1.84 million tons during the same period a year earlier.

India is the world's second largest sugar producer, trailing only Brazil. It exported approximately 2.6 million tons of the sweetener in the 2010-11 marketing year.

Prices found support amid speculation the recent decline in prices will prompt top consumer China to increase its sugar purchases.

According to sugar dealers in Asia, Chinese buyers reappeared in the physical market earlier in the week but stopped short of striking any deals. Other sugar traders said that China purchased at least 100,000 tonnes of raw sugar for nearby delivery from Thailand.

Speculation over Chinese buying on the physical market fuelled hopes the country will boost purchases of U.S. supplies to replenish declining state inventories.

China, the world's largest sugar consumer, has imported nearly 1.6 million tons of sugar in the first 11 months of 2011.

Meanwhile, agricultural commodity traders continued to eye developments surrounding the debt crisis in the euro zone. Earlier in the day, German Chancellor Angela Merkel said European Union leaders will take important decisions to stabilize the euro zone at a summit later this week and brushed off Standard & Poor's warning of a possible joint downgrade of euro zone nations.

S&P put the long-term sovereign-debt ratings of 15 euro zone members, including AAA-rated Germany on negative watch and flagged a potential two-notch downgrade for France.

Elsewhere on the ICE Futures Exchange, cotton futures for March delivery added 0.35% to trade at USD0.9254 a pound, while Arabica coffee for March delivery shed 0.35% to trade at USD2.3505 a pound.

Source : moneycontrol.com