Spot sugar extended losses to reach a two-month low on Tuesday as government curbs on buyers and sellers compressed demand amid rising supplies in the market, dealers said.
The government has asked millers to sell a part of their monthly non-levy quota every week, failing which the unsold quantity will be converted into levy sugar and sold at subsidized rate through the public distribution system.
It has also asked bulk consumers of the sweetener to stock a maximum of 10 days worth of consumption, leading to a drop in demand from makers of beverages, ice creams and chocolates.
“Millers are gradually lowering prices in tenders considering weak demand. They want money for cane procurement,” said a member of Bombay Sugar Merchants Association.
Mills usually pay farmers a large chunk of the cane price immediately after harvesting or within a fortnight of harvesting.
In Kolhapur, a key market in top sugar producer Maharashtra, the price of the most traded S-variety sugar fell 1.29% to Rs3,257.50 per quintal, the lowest level since 22 December. The price has fallen nearly 18% since hitting a record high of Rs3,972.30 on 7 January.
“In short term, the outlook is weak. Prices may correct by another Rs100 on supply pressure,” the member said.
Weakness in the global markets also depressed sentiments, dealers said.
New York raw sugar suffered its worst single-day loss in nearly two years on Monday, under pressure from long liquidation by investors, taking prices further from long-term peaks set three weeks ago.
The drop pushed the commodity down nearly 20% from the 29-year highs reached on 1 February.