Sugar suffers as India raises output estimate.

Sugar prices endured another pounding yesterday after estimates for India's production this season were revised higher.

ICE May raw sugar fell 5.4 per cent to 20.40 cents a pound while Liffe May white sugar dropped 5.8 per cent to $555.9 a tonne.

Sugar output in India, the world's second largest producer and biggest global consumer, could reach 16.8m tonnes in the 2009-10 season that runs until September 30, up from an earlier estimate of 16m tonnes, according to the Indian Sugar Mills Association.

This would imply an increase of 4.3 per cent in India's sugar output compared with the 2008-09 season, which was affected by poor monsoon rains.

Some traders, however, had been betting that India's production might drop below 15m tonnes this year, which would have raised its need for imports.

India could still need to import about 6m tonnes this year to satisfy domestic consumption requirements.

Karim Salamon, analyst at Sucden, said India's production problems had caused "huge turbulence" in the sugar market.

Mr Salamon said the fluctuations in India's domestic sugar production combined with an ongoing increase in its consumption had a huge impact on global sugar trade flows.

Cocoa prices dipped after the International Cocoa Organisation forecast a global supply surplus of 80,000- 90,000 tonnes in the ICCO's first forecast for the 2010-11 season, which starts in October.

Liffe May cocoa lost 0.5 per cent at £2,153 a tonne.

Crude oil prices pared early losses as the session progressed. Nymex April West Texas Intermediate dropped to a low of $80.16 but later traded just 38 cents lower at $81.49 a barrel. ICE April Brent lost 56 cents at $79.91 a barrel, recovering from a low of $78.70.

Analysts at the Centre for Global Energy Studies cautioned that crude oil prices above the $80-a-barrel mark were "not sustainable" as evidence of an improvement in the market's fundamentals was still lacking.

The CGES noted that data on tanker shipments from mid-February onwards suggested that Asian buyers might be trimming their crude imports while refineries elsewhere in the developed world were entering maintenance periods. Ronald-Peter Stöferle, of Erste Bank, said downward risks for oil prices at current levels clearly outweighed the potential for further gains.

Erste said it expected crude oil to retreat to about $60 a barrel by the end of the year as weak demand in the developed world and overly ambitious expectations for economic recovery became more apparent.

"We think that any further price increase will ultimately be built on shaky grounds and will thus not be sustainable," said Mr Stöferle.

He cautioned that an "unshakable trust in the alleged Chinese economic miracle" was responsible for fuelling hopes for further gains in oil prices.

Gold recovered from a dip to $1,109.40 a troy ounce to trade little changed at about $1,122.

Among the base metals, copper rebounded from early falls to rise 0.5 per cent to $7,510 a tonne.

Some traders think Chinese consumers might be waiting for copper prices to pull back towards the $7,000 a tonne level before stepping up their buying again.

Source : ft.com