Chicago: Sugar contracts surged to the most in at least two decades in London and jumped to a three-year high in New York as India’s abnormally dry monsoon threatened to reduce its cane crop and prolong a global production deficit.
Monsoon blues: A greenhouse in a cooperative sugar factory in Satara, near Pune, in July. Prices are up around 60% this year on prospects that India will import supplies for a second year. Prashanth Vishwanathan / NYT
Maharashtra, India’s biggest sugar-producing state, may provide as little as 4.6 million tonnes (mt) in the year starting 1 October, compared with 5 mt forecast in June, said Ajit Chowgule, a local industry official. Prices are up around 60% this year on prospects that India, the world’s largest sugar consumer, will import supplies for a second year.
“They just haven’t been getting the right amount of rains in India,” said Anthony Compagnino, a partner at East Coast Options Services Inc. in New York. “Yesterday was a major commodity rally on the weakness of the dollar, but sugar is back to its own fundamentally sound story at the moment.”
On Tuesday, raw-sugar futures for October delivery rose 0.21 cent, or 1.1%, to 19.35 cents a pound (around Rs20 a kg) on ICE Futures US in New York. Earlier, the commodity reached 19.46 cents, the highest for a most-active contract since 6 February 2006. White, or refined, sugar for October delivery climbed $9.30, or 1.8%, to $512.20 a ton on the Liffe exchange in London. The price earlier touched $513, the highest since at least January 1989.
White sugar on Wednesday rose to as much as $1.10, or 0.2%, to $513.30 a metric tonne on the Liffe exchange in London, the highest intraday price since January 1989. Refined sugar for October delivery, the most active contract, was trading at $513 at 9:10am local time.
Output in Maharashtra is likely to fall to 4.6 mt in the current season, which ends 30 September, from 9.1 mt a year earlier, Chowgule, the secretary of the Maharashtra State Cooperative Sugar Factories Federation Ltd, said by telephone from Mumbai.
“There was a near drought-like situation in parts of the state in June and July, and that damaged the crop,” he said. “Even if rains are normal in August and September, the damage can’t be undone.”
Below-average monsoon rainfall in July 2008 reduced yields from cane fields. Sugar production fell by half, and the country became a net buyer for the first time since the 2005-2006 season. Production nationwide is expected to drop 44% to 14.7 mt this season, the Indian Sugar Mills Association has said.
Raw sugar imports in the year starting 1 October may reach at least 4 mt, doubling the total for this year, Kushagra Nayan Bajaj, joint managing director of Bajaj Hindusthan Ltd, India’s biggest mill, said in an interview last week. Output may be a little changed at 15 mt to 16 mt, Bajaj said.
M. Shankar in London and Thomas Kutty Abraham in Mumbai contributed to this story.