China, the biggest sugar importer, may harvest its second-largest crop after favorable weather spurred farmers to increase planting, potentially cutting overseas purchases and widening a global surplus. Prices fell.
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 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 price reached a record in February 2011.
“The record-high prices last year fueled an expansion in acreage in China,” said Cheng Bo, general manager of the sugar department at 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, an 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, according to 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 the year beginning Oct. 1 from 3.3 million tons in 2011- 2012, the International Sugar Organization, or ISO, in London estimates. The 2011-2012 net imports would exceed purchases by the U.S. by 25,000 tons, making China the world’s biggest importer, according to ISO data.
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 as much as 0.6 percent to 20.04 cents a pound on ICE Futures U.S. in New York before trading at 20.10 cents at 3:42 p.m. Singapore time. The price reached 18.81 cents on Sept. 6, the lowest intraday level for the most-active contract since August 2010. Futures rose to a record 36.08 cents on Feb. 2, 2011.
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 1 percent to close at 5,389 yuan ($854) a ton, extending this year’s loss for the most-active contract to 9.1 percent. The cost of production for cane sugar in China is about 6,400 yuan a ton, based on a cane price at 500 yuan a ton, said Wang Jianfeng, an analyst at Nanhua Futures.
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.
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