Singapore/New Delhi: Tumbling domestic sugar prices in India have heightened speculation that importers are backing out of some deals, but evidence of washouts or defaults has remained elusive despite widespread suspicions.
Any confirmation that the world’s biggest consumer is backing out of deals could further erode a rally that has boosted global prices at least 100% this year.
Futures prices have already fallen 16% since their all-time high a month ago, with some traders last week citing the possibility of washouts by India as a factor.
Traders in India and Singapore contacted by Reuters could not confirm if any washouts—in which buyers give up the obligation to take delivery by paying a penalty—had taken place.
A poor monsoon that decimated the local cane crop ahead of the annual festival season and a switch by farmers to better paying wheat and rice flipped India into a net importer, buying a record 5 million tonnes of raw sugar in the just-ended crop year to September—the same amount it exported a year earlier.
A strong Indian appetite was the main driver for raw sugar futures prices more than doubling so far this year but the rally eventually raised fears of declines in consumption.
Indian cash sugar price were at their lowest in two months around Rs2,600 as worries about restrictions imposed by the government on buyers offset bargain hunting to meet festival demand.