India spot sugar eases as high price squeezes demand

MUMBAI, Nov 4 (Reuters) - Indian spot sugar price eased on Wednesday after hitting a record high the previous day as demand shrank at higher levels, though sentiment was bullish on estimates of a deficit for the second year running, dealers said.

In Kolhapur, a key market in top sugar producer Maharashtra, the price of the most traded S-variety sugar eased by 0.58 percent to 3,333.85 rupees ($70.93) per 100 kg, after hitting a record high of 3,353.4 rupees on Tuesday.

"Demand was slightly low compared to yesterday," said a member of the Bombay Sugar Merchants Association. "But most traders still believe there is upside left. It can go up to 3,600 in medium-term."

Lower area and drought will see India, the world's top consumer and the biggest producer of sugar after Brazil, fall severely short of domestic consumption for a second straight year in 2009/10, a Reuters poll showed. See [ID:nBOM546431]

The poll of 10 respondents, including millers and commodity brokerages, forecast an average estimate of 15.3 million tonnes for the sugar year, a little more than last year's output of 15 million tonnes, and below 2007/08's 26.3 million tonnes.

India will consume up to 7 million tonnes more sugar than it will produce in 2009/10, prompting the government to extend permission for duty-free imports, Farm Minister Sharad Pawar said on Wednesday. See [ID:nDEL539143]

Pawar said the season began with opening stocks of 2.2 million tonnes, down from 10 million tonnes a year ago, adding that the government planned to extend white sugar imports beyond November and raw sugar beyond March.

($1= 47 rupees)

(Reporting by Rajendra Jadhav; Editing by Sunil Nair)