Sugar Imports by China May Surge 35%, ANZ’s Deane Forecasts

Sugar imports by China, the world’s second-biggest consumer after India, may jump 35 percent as output trails demand, helping push global prices higher, according to Australia and New Zealand Banking Group Ltd.

Purchases may rise to 2.7 million metric tons in the year beginning Oct. 1, from about 2 million tons a year earlier, Paul Deane, a senior agricultural economist, said in a phone interview. The nation may produce 12.5 million tons in the year from Oct. 1, while demand may be 15 million tons, Deane said.

“All the evidence points to the fact that there is no stock of sugar left in China,” Deane, who has been an agricultural economist for a decade, said yesterday, citing domestic prices and sugar sales from state reserves.

Buyers in China may take advantage of a slump in prices that has seen sugar plunge about 42 percent since reaching a three-decade high on Feb. 2. Raw sugar for July delivery gained 2.4 percent to 20.96 cents a pound in New York yesterday.

Futures may average as much as 26 cents a pound in the first quarter of 2012, or 24 percent higher than yesterday’s closing price, as supply from Brazil and Thailand dwindles, Deane said. Sugar may average 22 to 23 cents during the rest of the year, he said.

Cooling Inflation

About 1.16 million tons of sugar was sold to the domestic market from China’s state reserves between August and February to cool prices, Deane said in a report last month.

China will be “happy” to see more imports after buying a “substantial” amount to help curb inflation as output declines for a third year, Liu Xiaonan, deputy head of the economy at the National Development and Reform Commission, said April 25.

The country’s food-price inflation jumped 11.7 percent in March, matching the rate in November, when prices advanced at the fastest pace since 2008. Rising consumer prices have prompted the central bank to raise lending and deposit rates four times since mid-October.

The government sold 150,000 tons of sugar from reserves on Feb. 28 at an average 7,424 yuan ($1,143) a ton, the industry website gsmn.com.cn said in March, citing the China Sugar Association. That’s equal to about 52 cents a pound.

The export price from Brazil or Thailand must be about 25 cents a pound to make it economical for China to purchase the sweetener even with an import tariff of 50 percent, Deane said.

If the government removed the tariff, importers may seek as much as 6 million tons from overseas to help rebuild stockpiles, he said.

China’s output may rise to 12 million tons from 11.3 million tons in the year ending Sept. 30, the U.S. Department of Agriculture’s Foreign Agricultural Service estimated April 15. Demand was estimated to drop to 13.6 million tons, from a revised 13.9 million tons in the current season, the USDA said.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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