LONDON: Sugar futures on ICE weakened on Wednesday after India approved a subsidy that could potentially pave the way for exports to the world market, while London cocoa rose to a new 17-month high.
SUGAR
August white sugar was down $7.50, or 2.30 percent, at $317.90 a tonne by 1130 GMT, after falling to a session low of $315.40.
India's cabinet on Wednesday approved a proposal to help sugar mills by paying cane farmers a subsidy for every tonne of cane they sell to them, a government source said.
Reuters last month reported that the government was likely to subsidise the sector, which has been reeling from a supply glut and struggling to export because of low global prices.
"The knee-jerk reaction was for the market to tank," one dealer said of Wednesday's move. "We don't need Indian sugar - it just means more supply. So the market has decided to run away."
However, dealers also noted the subsidy does not immediately make Indian sugar competitive on the global market, although it caps any recovery in global prices which last week hit their lowest since 2008.
Participants were looking for more detail on the subsidy and how it would address the gap between world prices and Indian domestic prices, which the dealer pegged at roughly $90 per tonne.
"It's significant in that the government is taking decisions on sugar," the dealer said. "But it doesn't seem to address the big problem fully."
July raw sugar fell 0.24 cents, or 2.1 percent, to 11.45 cents per lb.
COCOA
July London cocoa was up 11 pounds or 0.6 percent at 1,954 pounds a tonne in thin volume, after climbing to 1,966 pounds, its highest since November 2016.
This extended gains from the prior session, when the market was lifted by a sharp decline in the British pound.
Tuesday's move strengthened technicals, inspiring further chart-based buying, dealers said.
July New York cocoa was down $5, or 0.2 percent, at $2,889 a tonne.
COFFEE
July robusta coffee slipped $10, or 0.6 percent, to $1,805 a tonne.
In the prior session, the market surged more than 3 percent to a 5-1/2 month high as automatic buy orders were triggered.
July arabica coffee rose 0.45 cents, or 0.4 percent, to $1.2525 per lb, after rising to its highest since mid-February.
Indonesia's exports of Sumatran robusta beans from the Lampung province in April fell 65 percent year-over-year.
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