Sugar drops on profit booking

Sugar spot prices and futures which gained in the last two days witnessed profit booking on Tuesday and settled lower 0.13% and 0.85% respectively. Expectations that the Indian government might allow exports under Open General License very soon helped support sugar prices.
Also, reports of lower output in UP, the second major Sugar producing state in India, also provided support to the prices.
The Indian government is considering “at the highest level” the Maharashtra Chief Minister, Mr Prithviraj Chavan's demand — echoed by the Union Agriculture Minister Mr Sharad Pawar as well — to completely lift the ban on export of onion and sugar(Source: Business Line).
ICE Raw Sugar futures ended higher 0.23% yesterday due to lower global supplies but Liffe Sugar ended lower 3.36% respectively on liquidation by the market participants owing to good prospects of Sugarcane crop in Brazil after recent rains. No clear decision by Russia regarding easing import restrictions of sugar made market participants to liquidate their long positions. This also pressurized international sugar prices.
Domestic Production
According to the second advance estimates on crop released during the last week by agriculture ministry, India’s 2010-11 Sugarcane output is seen at 336.7 million tonnes vs Sept estimate of 324.9 million tonnes. The Indian Sugar Mills Association (Isma) had revised the country’s sugar production downward to 25 million tonnes (mt) for the 2010-11 season against 25.5 million tonnes estimated earlier due to lower recovery rates in Uttar Pradesh.
According to ISMA, Sugar output in Uttar Pradesh is lowered to 6.4 mt from 7 mt due to late rains, while in Maharashtra, the country’s biggest sugar producer; it is kept unchanged at 9.4 million tonnes. The Consumption for 2010-11 is projected at around 22 million tonnes. Due to dry weather in Brazil in 2010, the crop prospects were not so good, rains were scarce and crop was developing poorly, but good rains since last month coupled with higher usage of fertilizer have improved the Sugarcane crop prospects in Brazil.
Brazil's center-south (90% of total production in Brazil) 2011/12 cane crush is estimated at a record 566 million tonnes, up from 560 million tonnes forecast in December.
Thus, despite of decline in Australia’s Sugar exports due to floods and cyclone, global supplies would not fall much as Brazil would make up for any shortfall in Sugar globally. This would keep Global Sugar prices stable in the short term.
Outlook
Sugar prices in coming days are expected to recover on expectations that the government may very soon take a positive decision on Sugar exports coupled with downward revision of India’ s 2010-11 Sugar output. In the short to medium term, domestic Sugar price movement would be dependent on the permissible sugar exports from the country. Domestic sugar could gain if exports are allowed given the high sugar prices prevailing in the global markets.
We expect prices to trade in the range of Rs. 2750-2900 per qtl levels in the short term (during the month of February).

(Source: http://www.commodityonline.com/futures-trading/technical/Sugar-drops-on-profit-booking-21959.html)