In Kolhapur, a key market in top sugar producer Maharashtra, the price of the most traded S-variety sugar jumped 2.63% to Rs 3,500 ($74.9) per 100 kg, breaching its earlier peak of Rs 3,443.5 set on November 6, dealers said.
Traders were speculating lower non-levy sugar quota for January, said Ashok Jain, president of the Bombay Sugar Merchants Association.
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.
Pressure of imported white sugar is not there. Two-three weeks back importers were selling sugar aggressively, Jain 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. The rally in overseas prices is boosting sentiment, said a broker based in Pune, Maharashtra.
Raw sugar futures hit a 29-year peak in New York on Tuesday, then turned sharply lower on profit taking, while in London, the whites closed above $700 per tonne for the first time.
In the 2009-10 season, lower acreage and poor rains will keep Indias output at 15.3 million tonne, falling severely short of domestic consumption of about 23 million tonne for a second straight year, a Reuters poll showed in October. Indian prices need to rise by Rs 2-3 per kg to bring parity with overseas prices. Now, no one is striking fresh import deals due to negative margin, the broker said.
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.
Sentiment is very bullish. We can see further upside of Rs 50-100 (per 100 kg), Jain said.