Sugar futures dropped off dramatically in Thursday trading, driven partially by news of a bumper Indian sugar crop. However, the potential prospect of a government-imposed export quota in the South Asian nation still lingers over the markets – if the Indian government does limit overseas sales of the commodity, the bullish price momentum could return quickly.
The surplus of supply over demand could hit 3.5 million tons this year.
On the IntercontinentalExchange, raw "No. 11" sugar futures for March 2011 delivery lost 3.53 percent to 31.69 cents per pound; the May 2011 contract dropped from 30.16 to 29.13 cents per pound.
The dollar's also been rising in recent days, driven by some economic uncertainty in Europe and ahead of the Group of 20 meeting in Seoul, South Korea.
"There has been a great deal of speculation about when and how much India will export," Michael McDougall, a senior vice president at Newedge USA, wrote in an email according to Bloomberg News. "This morning the dollar is back to surging and this has sugar immediately under pressure."
India is the world's second-biggest producer after Brazil, so it has a fairly signficant impact on the global commodity markets. Brazil's output has been relatively strong, but it still deals with infrastructure issues that afflict its roads and ports.
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