Indian sugar futures shed more than 0.5 percent on Thursday as traders locked in profits after they had climbed nearly 2 percent in two days, but analysts said they expected prices to stay firm in the short term.
The market will be supported by measures announced by the government in the past two weeks to lift prices that had been depressed by prospects of a bumper crop and lower global prices, an analyst at Motional Oswal Commodities Brooking Pvt. Ltd said.
At 2:10 pm (0840 GMT), the July contract on the National Commodity and Derivatives Exchange (NCDEX) was down 0.8 percent at 1,347 rupees per 100 kg.
The August contract dropped 0.5 percent to 1,375 rupees. "The July futures are getting good support at 1,345 level and despite some profit booking the market should rebound soon," the analyst at Motional Oswal said. On Tuesday, the government extended an export incentive for the mills and a day later announced a lower domestic free-sale quota for July.
In India, sugar mills contribute 10 percent of their total output, known as the levy quota, to build government stocks for sale to the poor at cheaper prices.
The government said in February that sugar meant for export would be exempt from the levy until July 2. On Tuesday, it extended the incentive by six months to January 2008.
Last week, the government raised the sugar buffer by 3 million tonnes to 5 million tonnes to help ease the pressure on millers saddled with excess supply.
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