China To Import Sugar Aggressively On Weak Brazil Prices- ANZ .

China is likely to buy sugar aggressively over the next half a year and could import up to 1.8 million tonnes in three to four months, to capitalise on weak prices especially from Brazil, said a report by Australia and New Zealand Banking Group Ltd.

"With China in strong need to replenish domestic supplies and ease the rise of further inflationary pressure from higher domestic sugar prices, China's pent-up demand for sugar imports is strong," Paul Deane and Victor Thianpiriya wrote in the report.

China's sugar prices have hovered near record-high levels in past months and in some areas at 50 cents/lb, up 50 percent from the year-ago period, even during China's peak sugar production period.

"An increasingly wide disparity is emerging in pricing between importing sugar from Brazil and domestic pricing," the report said.

Similar disparity occurred during the third quarter last year, leading to China importing a record of 960,000 tonnes in the period, it said.

China imported 62 percent more or a record 1.766 million tonnes of sugar in the whole year of 2010, of which 62 percent came from Brazil, China's official customs data showed.

China accounts for around 9 percent of global consumption, or the equivalent of about 15.5 million tonnes of raw sugar.

Analysts said the Chinese government is holding a low level of state reserves after it has been releasing reserves to cover deficits for three years in a row as consumption outpaces production growth, leaving the government in a difficult position to control food prices later in the year.

China is facing more than 2 million tonnes of sugar deficit in the current year. (Oct/Sept)[ID:nTOE6B700H]

Food prices account for one-third of China's consumer price index (CPI), which quickened to 5.4 percent in the year to March, the fastest rate since July 2008, with food prices up 11.7 percent.

China's commerce ministry has said China will import more sugar to cover shortages and replenish reserves.[ID:nTOE6BL05Q]

Industry officials told Reuters earlier that the Chinese government was willing to build up reserves when world sugar prices <SBc1> fell to about 20 cents/lb. New York price fell to a six-month low, or at 24.44 cents per lb, on expectations of better a crop from Brazil, India and Thailand.

On Monday, senior Thai officials said that Thailand's 2010/2011 sugar output may reach a record high of 9.0 million tonnes, while the country may have a record of 6.2 million tonnes of sugar left for exports in 2011. [ID:nL3E7FI0IU]

Brazil's exports in 2011 are expected to be higher than last year's record of 28 million tonnes, but with its ports operating at near capacity, tightness in the sugar market could be magnified if serious bottlenecks occur.

Source : forexyard.com