China May Import More Sugar To Fight Inflation, Output Drop.

China, the biggest sugar user after India, may seek more imports after buying a “substantial” quantity from overseas to try to curb inflation as output drops for a third year, according to the top economic planning agency.

While the country has sufficient stockpiles after recent imports, it’ll be “happy” to see more purchases as overseas sugar costs less than local supplies, Liu Xiaonan, deputy head of the economy and trade division at the National Development and Reform Commission, or NDRC, said at a conference yesterday.

Increased imports may help to buoy raw-sugar prices that have dropped 27 percent this year, while slowing inflation in China from the fastest pace since 2008 last month. Output may drop to 10.5 million metric tons this year from 10.74 million on frost and labor shortages, the China Sugar Association said.

“All eyes are on the policy front given that the production shortfall now becomes clear,” said Axl Wang, Beijing research manager at Wanda Futures Co. China announced a 1.94 million ton, sugar-import quota at the start of the year and has yet to award most of that to qualified companies, Wang said.

China may buy as much as 1.8 million tons of sugar from overseas over the next four months, Australia and New Zealand Banking Group Ltd. said on April 18. Prices in some provinces of China are now more than 50 cents per pound, it said.

White-sugar futures on China’s Zhengzhou Commodity Exchange have advanced 36 percent in the past year to 6,815 yuan ($1,044) a ton at 10:45 a.m. in Beijing today. In London, refined sugar for August delivery closed little changed at $639.10 a ton on NYSE Liffe on April 21.

‘Top Priority’

“The government has made it a top priority this year to ensure supply and maintain price stability,” Liu said at the conference in Kunming. “We have taken the opportunity to import a substantial amount of sugar and now have enough stockpiles to plug the production shortfall.”

The government can “easily ensure 1.2 million tons of sugar supply” from stockpiles until the new crop is available next season, Ding Shuwang, deputy head of the market-control division under the Ministry of Commerce, said in Kunming, citing China’s increasing capacity to process raw-sugar imports into refined sweetener. The government sold 760,000 tons from its reserves since the year that began on Nov. 1, NDRC’s Liu said.

Sugar demand in China may reach more than 13.5 million tons this year, down from an estimated 13.78 million tons a year ago, as record prices encouraged the use of cheaper substitutes such as corn syrup and eroded affordability for low-income consumers, said Liu Hande, head of Guangdong Sugar Association.

Inflation in China may rise about 4.5 percent this year, exceeding a 4 percent government target, the Xinhua News Agency said yesterday, citing Chen Dongqi, deputy chief of the Macroeconomic Research Institute under the NDRC. In March, consumer prices rose 5.4 percent from a year earlier, according to government data. Food prices jumped 11.7 percent last month.

Source : businessweek.com