Sugar prices hit their lowest in more than three years on Monday on news that India, the world's second largest producer of the sweetener, will allow 1 million metric tonnes of sugar exports in the current season that runs through to end-September.
Reuters reported on Sunday that New Delhi was set to allow the exports in a bid to support sugar mills and prop up local prices of the sweetener, which had come under pressure in recent months.
Although there had been speculation for weeks that exports would be allowed, the decision surprised some traders as this season's production is expected to fall below consumption for the first time in eight years.
"The news is likely to keep pressure on global prices," said ING's head of commodities strategy Warren Patterson.
White sugar futures on the ICE exchange LSUc1, used as a global benchmark to price the sweetener, hit $470.20 a tonne earlier, their lowest since September 2021.
They later traded down 1% at $473.60 a tonne, bringing losses for the year to more than 5%.
Raw sugar futures SBC1 did not trade due to a U.S. holiday, but closed down 1% at 18.22 cents per lb on Friday.
Production Decline
India's production could fall to around 27 million tonnes from 32 million tonnes last year and below annual consumption of more than 29 million tonnes, according to leading trade houses in the country.
New Delhi did not allow exports in the previous season.
A Europe-based sugar industry expert told Reuters that while he too expected India to produce around 27 million tonnes this season, one leading trade house had been promoting the view that output would be significantly higher.
India's sugar mills, meanwhile, expect next season's production to recover.
Sugar prices have also come under pressure this year on concern that Thailand may have more of the sweetener to sell because of a halt to syrup exports to China.
Chinese authorities have asked Thailand to inspect dozens of factories before opening negotiations to lift a ban imposed last month on sugar syrup and premixed powder exports from the Southeast Asia nation.
In other soft commodities traded, London cocoa LCCc1 fell 0.6% to 98,905 a tonne, while robusta coffee LRCc2 rose 1% to $5,057 a tonne.
