Sugar prices double in 2009 on deficit, demand

A worker carries a sack of sugar at a food warehouse in Mumbai in this July 11, 2008 file photo.

MUMBAI (Reuters) - Indian spot sugar price rose for a second day on Thursday to a fresh record high, nearly doubling year-on-year, on lower-than-anticipated sugar quota for January amid healthy demand, dealers said.

In Kolhapur, a key market in top sugar producer Maharashtra, the price of the most traded S-variety sugar rose 1.15 percent to 3,540.2 rupees ($76) per 100 kg, breaching its earlier peak of 3,500 rupees set on Wednesday.

"The market was expecting 1.2 million tonnes of normal non-levy sugar quota, but government released 1.1 million tonnes," said a member of the Bombay Sugar Merchants Association (BSMA).

Non-levy, or free-sale sugar, is sold by millers in the open market, but the quantity each mill can sell is fixed by the federal government on a monthly basis.

The output deficit, a delay in imported white sugar to hit domestic markets and firm overseas markets also underpinned the sentiment, the member said.

Imported sugar has piled up at ports, particularly in Kandla in western India, because of a shortage of railway wagons and protests against raw sugar imports by farmers in the northern Uttar Pradesh state, government and industry officials said earlier this month.

Indian buyers have stopped contracting new sugar import deals as local prices are lower than the landed cost of imports, Vinay Kumar, managing director of National Federation of Cooperative Sugar Factories, told reporters earlier this month.

"This year was historical due to a sharp drop in production. Next year also prices will remain on higher side, at least till beginning of next crushing season in October 2010," said Ashok Jain, president of BSMA.

In the 2009/10 season, lower acreage and poor rains will keep India's output at 15.3 million tonnes, falling severely short of domestic consumption of about 23 million tonnes for a second straight year, a Reuters poll showed in October.

(Reporting by Rajendra Jadhav; Editing by Harish Nambiar)

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