Sugar futures on the National Commodities and Derivates Exchange Ltd (NCDEX) gained 0.62 per cent to Rs 2,914 a quintal on Tuesday.
It is expected that the Government may lower sugar quota for open market sale in the September quarter. This will tighten supply and boost prices.
Below normal rains
The forecast of below normal rains also raised concerns over sugarcane output.
Rainfall in the key sugarcane growing regions of Maharashtra was 51 per cent below normal since the beginning of the season.
Though the India Meterological Department has predicted normal monsoon for the whole country, in the northwest region, it has forecasted monsoon to be below normal at 93 per cent.
The progress of southwest monsoon during the sugarcane growing period is crucial as it will have an impact on the output as well as recovery (juice content).
As on June 22, the area under sugarcane is estimated at 51.52 lakh hectares (ha) compared with 50.14 lakh ha a year ago.
Lower acreage is reported mainly in Maharashtra (down by 10 per cent), Karnataka (down by 11.6 per cent) and Uttarakhand (down by 8 per cent). Higher acreage is reported in Bihar, Punjab, Tamil Nadu, Uttar Pradesh and Andhra Pradesh.
With the opening stock of 6.8 million tonnes, domestic sugar supplies are estimated higher at 32-33 mt against the domestic consumption of about 22.5-23 mt for 2012-13 season.