(Bloomberg) — Sugar futures in both London and New York slumped as traders parsed a decision by the Indian government to allow mills and refiners to import duty-free raw sugar.
With the government’s import policy now out, “people have looked into the details of the notification, the time limit, the prices of the import, and the consensus is building that India will not be able to import more than 500,000 tons of sugar,” said Harsh Soni, a New Delhi-based sugar analyst and co-founder at consultancy Greenleaf.
Raw sugar futures in New York surged more than 6% last week after India allowed duty-free raw sugar imports of up to 1 million tons through Oct. 31, a rare step by the world’s second-biggest sugar producer.
On Monday, the most-active white sugar futures in London fell as much as 3.9%, the biggest drop in more than three months. Raw sugar in New York slid as much as 3%.
India’s supply tightness, concerns about the impact of a stronger-than-usual El Niño weather pattern and processing disruptions in top shipper Brazil had all supported prices last week. That boosted the 14-day relative-strength index above 70 — a level that may suggest that futures have rallied too quickly.
India’s import order is considered to be “a relatively tall order,” analysts at GreenPool wrote in their weekly global sugar analysis published on Monday. The order would benefit cargoes already afloat and mills with enough capacity to refine the sugar before India’s new harvest season starts.
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