ICE sugar slips as India approves subsidies for cane farmers
Published: 05/02/2018, 5:03:14 PM
Sugar futures on ICE weakened on Wednesday after India approved a subsidy that could potentially pave the way for exports to the world market, according to Reuters.
ICE August white sugar was down US$7.50, or 2.30%, at US$317.90 a tonne by 1130 GMT, after falling to a session low of US$315.40.
India's cabinet on Wednesday approved a proposal to help sugar mills by paying cane farmers a subsidy for every tonne of cane they sell to them, a government source said.
Reuters last month reported that the government was likely to subsidise the sector, which has been reeling from a supply glut and struggling to export because of low global prices.
"The knee-jerk reaction was for the market to tank," one dealer said of Wednesday's move. "We don't need Indian sugar - it just means more supply. So the market has decided to run away."
However, dealers also noted the subsidy does not immediately make Indian sugar competitive on the global market, although it caps any recovery in global prices which last week hit their lowest since 2008.
Participants were looking for more detail on the subsidy and how it would address the gap between world prices and Indian domestic prices, which the dealer pegged at roughly US$90 per tonne.
"It's significant in that the government is taking decisions on sugar," the dealer said. "But it doesn't seem to address the big problem fully."
ICE July raw sugar fell 0.24 cents, or 2.1%, to 11.45 cents per lb.