Sugar prices plunged back below 20 cents a pound in New York for the first time since August on reports that some Indian mills were reneging on purchases accelerated investors' exit from the sweetener.

New York's May raw sugar contract hit 18.82 cents a pound in morning trade, taking to 38% the drop for a spot contract from a 29-year high hit in January.

The latest decline, falling below a 20 cents level viewed as a key landmark by investors, followed reports that Indian sugar mills were cancelling purchase orders made during the sweetener's bull run.

Not the first time 

India sugar firms have walked away from more than 100,000 tonnes of import deals, a figure which could rise to 600,000 tonnes if prices did not rebound, officials told Reuters.

It was unclear whether the cancellations were washouts, in which buyers pay a penalty to evade purchase obligations, or simple defaults.

"I do not know whether this is true or not, but it has certainly happened before," David Sadler, at Sucden Financial Sugar, told Agrimoney.com.

"It has been a major reason why the market has gone down yet again."

'Falling knife' 

Another depressant on prices has been the movement of moving averages, with the 10-day and 20-day moving averages crossing below those for 100 and 200 days, an event viewed by many investors as a sell signal.

"This is bringing out more liquidation," Mr Sadler said.

However, another technical indicator, the relative strength index, which compares an average of positive and negative closes, was "well into oversold" territory and pointed to a rebound.

"I think the market is cheap, and people should be looking to buy," said Mr Sadler, who has advising investments through spreads, and on later contract, to mitigate risks.

Another trader told Agrimoney.com: "Who would catch a falling knife? There will be money to be made from this, but it may take guts, as well as nous."

New York sugar closed down 3.1% at 19.69 cents a pound.

London white sugar for May closed down 3.4% at $537.10 a tonne, after touching a six-month low of $518.70 a tonne earlier.