The sugar market’s correction threatened to descend into a rout yesterday as prices dropped sharply for a second session.
ICE May raw sugar fell 4.3 per cent to 21.30 cents a pound, taking losses over the past two sessions to 11.7 per cent.
White sugar prices fared just as badly with the Liffe May white sugar falling 4.2 per cent to $609 a tonne, down 9.1 per cent over the past two sessions.
The price falls were triggered by an industry report of a recovery in India’s sugar production with output up 3.5 per cent to 11.9m tonnes in the new season which started in October, compared with the same period a year ago.
A second report suggested a larger improvement in Indian production, up 5.5 per cent to 13.25m tonnes, according to Vinay Kumar, managing director of the National Federation of Co-operative Sugar Factories.
Higher production would reduce the need for India to import supplies from international markets to meet its domestic consumption needs.
Some of the largest sugar importing countries have deferred buying fresh supplies, awaiting the start of the new harvest in Brazil.
“Buyers have, understandably, stood back from the market as prices have fallen but they cannot wait indefinitely,” said Tobin Gorey, commodity strategist at JPMorgan.
Mr Gorey said that as many processing plants were closed in consuming countries, any buying would be biased towards refined white sugar.
The price premium for white sugar over raw sugar has risen even as the market has retreated. White sugar prices have dropped 20.6 per cent since hitting a record $767 a tonne in late January, while raw sugar prices have sunk almost 30 per cent after reaching a 29-year high of 30.40 cents a pound at the start of February.
JPMorgan said the spread between white and raw sugar prices could increase further due to short-term consumption requirements for refined sugar.
