by Agrimoney.com
Sugar prices slumped 5% after India's government, under pressure from mills, allowed an additional 500,000 tonnes of unrestricted exports.
The concession fell short of the 1.5m tonnes in shipments that the Indian Sugar Mills Association had been seeking, after stocks reportedly rose above 23m tonnes this month – more than a year's supply.
Even so, the move by the world's second-ranked producer of the sweetener took markets by surprise, initially sending New York's July raw sugar contract down 5.7%.
"This decision was not a given," Macquarie analyst Kona Haque, in London, said.
"Only earlier this week, the government said it was going to wait until the end of the year to release more exports."
'Really strong margin'
Such caution was lent credibility by the government's proven caution over measures which risk stoking inflation, currently running at more than 9%.
However, domestic sugar prices have been on the slide, opening up a discount of some 5,000-6,000 rupees per tonne to international values.
"There is a really strong export margin now," Ms Haque said.
Mills have been especially keen for immediate concessions on exports given the likelihood of a continuing seasonal rise in shipments from Brazil, the top exporter, where the logistical hang-ups which marred trade last year have, thus far, proved less severe this time.
Terry Roggensack, at Hightower Report, said: "Traders see some tightness for spot sugar supply in the next few months. But with most major world producers expecting higher production this year, a global production surplus for the coming year is seen as a longer-term negative force."
Supply boosters
Expectations of a further rise in Indian output in 2011-12 have been lifted by forecasts of a near-average monsoon and a lift in plantings encouraged by higher prices.
Vinay Kumar, managing director of India's National Federation of Co-operative Sugar Factories, on Thursday estimated output at 26.0m-26.5m tonnes, a rise of 8-10% year-on-year, with some estimates as high as 28m tonnes.
Export supplies could also be boosted by improved weather in Europe, which could put it "in a position to allow the export of 700,000 tonnes", Mr Roggensack said, also highlighting a rise in beet sowings in Russia, a major importer.
Raw sugar for July had recovered to 26.31 cents a pound at 14:10 GMT, down 3.4% on the day, with London white sugar for August down 2.0% at $725.50 a tonne.
As an extra depressant to prices, the dollar soared 1.2% after Jean Claude Trichet, the president of the European Central Bank, warned that the Greek crisis was destabilising the eurozone.
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