Sugar hit new lows as India approved to subsidize shipments of raw sugar to ease the overwhelming supply. The government will give an incentive to export 4 million metric tons over the next two years. The objective of the subsidy is too increase exports, in the already overflowing global market, to aid depressing prices domestically, according to Citigroup’s Sterling Smith. “A test of the 15-cents-a-pound area seems likely before the end of the week,” added Smith.
Indian stockpiles increased to 8.85 billion tons since the start of the season, the highest inventory in five years. The Indian Sugar Mills Association (ISMA) wants to increase exports to trim production losses with cane costs rising and sugar prices declining. ISMA reports that sugar farmers are owed 26 billion rupees, $422 million, from processing factories.
Sugar No. 11 futures fell to new lows at $15.1 before finding some support, which helped the price pull back to $15.52. Technically, the movement of sugar’s downward movement is strong, but, considering the swift nature of the decline, a pullback to $15.55/65 is probable. In London, refined sugar fell to $414.40 per ton on the NYSE Liffe, striking the lowest for an active contract since 2009.
Sugar supplies are expected to exceed demand by 4.73 million tons in the 2013-14 season that started on October 1, according to the International Sugar Organization in London. This marks the fourth year of surpluses. Unfortunately, China, the second-largest global buyer of the raw commodity, is expected to have a 29 percent decease in imports, according to Green Pool Commodity Specialists.