MUMBAI: Indian sugar futures extended losses for a third session on Friday as mills sought to sell their government-set quotas by a Monday deadline, with some expectations prices could recover after that.
However, a recent improvement in rains in key growing areas could keep sentiment subdued.
"Sugar producing regions of Maharashtra received good rains. It could support standing crop in the state and may prevent a steep decline in the output," said Vedika Narvekar, a senior analyst with Angel Commodities Broking Pvt Ltd.
Rains in western Maharashtra, the key sugar producing region, were 83 percent above average in the week ended Sept. 5, and that eased concerns of a steep decline in sugar output due to drought and diversion of the crop for fodder.
The state has been facing an acute shortage of green fodder due to drought, which prompted farmers to sell mature cane for animal feed.
Once the government-set quotas, known as "non-levy" sugar, are exhausted by mills, there could be some recovery in sugar prices due to the approaching festival season, said Pradeep Bhanushaali, a dealer at Vashi spot market near Mumbai.
Indians celebrate a host of festivals from September to November, and demand for sweets surges during this period.
The Indian government has provided an additional 10 days to sugar mills to sell around 200,000 tonnes of unsold non-levy sugar stocks of August by Sept. 10.
India's monsoon has splashed back into life, lifting the threat of prolonged drought in the major rice and sugar producer with a second consecutive week of heavier-than-normal rains that could revive yields.
The key October contract on the National Commodity & Derivatives Exchange closed down 1.04 percent at 3,531 rupees per 100 kg.
In the Kolhapur spot market in top producing Maharashtra state, sugar fell 34 rupees to 3,471 rupees per 100 kg.
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