Dec. 18 (Bloomberg) -- Brazil, the world’s largest sugar producer, is boosting shipments to China, fueling speculation that demand in the world’s second-biggest importer of the raw sweetener will exceed forecasts for a second year.
Vessels scheduled to sail from Brazil’s main ports on Dec. 11 were set to take 234,500 metric tons of sugar to China, more than twice the previous week’s total, according to Recife, Brazil-based shipping agency Williams Servicos Maritimos Ltda. Imports into China climbed to a record in October, the first month of the 2013-14 season, customs data showed.
China brought in 3.8 million tons of raw sugar in 2012-13, estimates Kingsman SA, a unit of McGraw Hill Financial Inc.’s Platts. That’s almost four times the amount a U.S. Department of Agriculture unit forecast at the start of last season. Purchases beat estimates as a government stockpiling program attracted more shipments. Imports will probably fall 29 percent this marketing year to 2.7 million tons, according to Kingsman.
“Our forecast is based on the assumption that the Chinese government won’t restart state purchases,” Xiaoxiao Du, an analyst at Kingsman in Lausanne, Switzerland, said yesterday by e-mail. “The number of imports may surprise us on the upside if government implements the stockpiling program once again.”
While sugar futures fell 17 percent in London and 18 percent in New York this year as supplies outpaced demand, a government stockpiling program meant Chinese futures slid at a slower pace, dropping 12 percent. Futures in the Zhengzhou Commodity Exchange were $367 a ton more expensive yesterday than on NYSE Liffe. The price gap widened about 4 percent in the past two months, data compiled by Bloomberg showed.
China may phase out its stockpiling program and partially replace it with direct subsidies to cane and beet farmers as early as the crop starting October 2014, Zhao Lihua, a director at the economy and trade division of the National Development and Reform Commission, said last month. That fueled speculation imports would fall. The International Sugar Organization in London forecasts Chinese purchases to decline 36 percent to 2.35 million tons this season, it said in a Dec. 9 report.
“The rebuilding of stocks in China, particularly in government reserves, will diminish the need for imports in 2014,” Paul Deane, an economist at Australia & New Zealand Banking Group Ltd., said in a report on Dec. 4, forecasting imports could decline to 2 million tons. “We see this as placing a natural cap on global sugar prices in 2014.”
China brought in 709,873 tons of sugar in October, customs data showed. That means the nation is on track to import more than 4 million tons in a calendar year for the first time since at least the mid-1990s, ANZ’s Deane said. Vessels carrying 132,500 million tons of raw sugar left Brazil’s main ports to China in November, according to SA Commodities and Unimar Agenciamentos Maritimos Ltda. in Santos, Brazil. That compares with 100,000 tons in the same month a year earlier.
“It’s too early in the season to assume much change to the balance sheet as China’s domestic crop is just coming on stream,” said Toby Cohen, a director at London-based Czarnikow Group Ltd., which traded 2.4 million tons of raw sugar last year. “However, the scale of imports surprised everyone last season and could do so again.”
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