By Bloomberg News
China, the biggest sugar importer, is set to harvest its second-largest crop after favorable weather spurred farmers to increase planting, potentially cutting overseas purchases and widening a global surplus.
Production may climb 19 percent to 13.7 million metric tons in the season starting October, according to the median estimate in a Bloomberg survey of nine analysts and traders. Output totaled 11.5 million tons this season, according to the China Sugar Association. The crop reached a record of 14.8 million tons in 2007-2008, data from the association show.
Futures slumped to a two-year low in New York this month as dry weather helped accelerate cane crushing in Brazil, the world’s biggest producer, and a rebound in monsoon rains improved crop prospects in India, the second-largest grower. Sugar is the third-worst performer in the Standard & Poor’s GSCI index of 24 raw materials this year amid forecasts for a third consecutive global surplus, helping cap world food costs.
“The record-high prices last year fueled an expansion in acreage in China,” said Cheng Bo, general manager at sugar department at the PKU Founder Commodities Group Co. in Beijing. “The crops in Guangxi will have good sugar content amid favorable weather.” Guangxi is the country’s main cane grower.
The area under the cane crop rose about 12 percent this year in China, Xiu Ziyang, analyst at Citic Securities Futures Co., said on Sept. 17. Cane crushing usually starts in November and lasts till the end of March.
China may not need to import sugar if the country produces between 13.5 million tons and 14 million tons in 2012-2013, said Jonathan Kingsman, chief executive officer of researcher and broker Kingsman SA. The Lausanne, Switzerland-based company estimates output at a “conservative” 12.75 million tons and consumption at 14 million tons.
Imports may continue if the government sought to stockpile the surplus and boost domestic prices above global rates, Kingsman said. The country’s imports may fall to 1.95 million tons in 2012-2013 from 3.3 million tons in 2011-2012, the International Sugar Organization in London estimates.
The global surplus next season will be 13 percent bigger than initially estimated, with a positive outlook for crops in China and Russia, Rabobank International said Sept. 11. Supplies will be 5.2 million tons more than demand, compared with a previous forecast of 4.6 million tons, it said. That follows an estimated surplus of 8.4 million tons in 2011-2012.
Raw sugar for March delivery dropped 3 percent to close at 20.15 cents a pound on ICE Futures U.S. in New York yesterday, the biggest drop for the most-active contract since Aug. 21. The price reached 18.81 cents on Sept. 6, the lowest intraday level since August 2010.
China usually allocates 1.94 million tons of import quota under the World Trade Organization’s framework. Purchases this year will exceed that quota and may reach 3.5 million tons as premiums in the local market have allowed the refiners to bring in more shipments even after paying a 50 percent duty, said Sun Ye, trader at Shanghai Tangzhishen Investment Co.
White sugar for January delivery in Zhengzhou dropped 0.3 percent to 5,429 yuan ($859) a ton at 9:03 Singapore time, extending this year’s loss for the most-active contract to 8.5 percent. Cost of production for cane sugar in China is around 6,400 yuan a ton, based on the cane price at 500 yuan a ton, Wang Jianfeng, analyst at Nanhua Futures said.
China will soon introduce policies to prevent prices from falling further, Liu Xiaonan, deputy head of the economy and trade division of the National Development and Reform Commission, the top economic-planning agency, said on Sept. 6 in Zhengzhou.
“What the government can do is through stockpiling and imports control,” Liu said. “Our principle is not to disrupt the market but to ensure a smooth operation.”
The government will stockpile 500,000 tons of refined sugar from Sept. 20 at a base price of 6,200 yuan a ton, the commission said Sept. 18.
To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at email@example.com
Incoming search terms:
- Www Kisannet
- www kisannet com
- china sugar consumption
- Www kissan net com