Indian sugar rises on firm spot demand, low output

MUMBAI (Reuters) - Indian sugar futures edged up on Monday as demand in the spot market rose ahead of peak summer season buying, while estimates of lower-than-expected output this crop year underpinned sentiment.

At 4:04 p.m. (1034 GMT), the March contract NSMH9 on the National Commodity and Derivatives Exchange was up 0.38 percent at 2,126 rupees ($41) per 100 kg, while the April contract NSMJ9 had risen 0.46 percent to 2,183 rupees.

"Lower production estimates are pointing at a larger sugar deficit," said an analyst with SMC Comtrade.

India's farm minister forecast last week output would drop to about 16.5 million tonnes, in line with trade estimates but lower than earlier expectations of 18 million tonnes and far below last year's production of about 26.5 million tonnes.

Indian sugar mills started crushing late this year but have begun shutting up operations around two months earlier than usual as cane supplies have dwindled, industry officials said on Thursday. [ID:nBOM128076]

Spot prices in top producing state Maharashtra rose 0.52 percent to 2,110.9 rupees.

With sugar prices rising ahead of a general election, some traders had expected the government to increase the March quota for free sale in the open market.

Its decision on Monday to leave the quota unchanged at 1.6 million tonnes helped lift futures prices, a trader at a Mumbai-based sugar importing firm said. [ID:nBMB004774]

India's government sets monthly and quarterly quotas that millers can sell freely in the market.