By Niu Shuping and Tom Miles
China's 2010/2011 sugar output is expected to slip this year to 10.5 million tonnes, down from 10.74 million tonnes last year, but the government has already stocked enough imports to cover any deficit, an industry website quoted government officials as saying on Monday.
"We have already imported quite a volume to replenish reserves, far more than needed to cover the deficit in producing areas, and also enough to ensure the supply for the current year," said Liu Xiaonan from the National Development and Reform Commission, the government's top economic planning body.
But Liu did not say how much China had imported for its reserves and, without supporting figures, it was unclear how the government could have covered a deficit that some analysts estimate at 3 million tonnes.
In December China's Commerce Minister Chen Deming said China would import to shore up its reserves of sugar, meat and other staples. [ID:nTOE6BL05Q]
But in the first three months of this year, sugar imports totalled only 79,000 tonnes, suggesting little change in the government's stockpiles of imported sugar since Chen's speech.
That compares to record imports of nearly 1.8 million tonnes in 2010, which must have included about 800,000 tonnes of government buying, based on the quotas available. Private buyers are only entitled to 30 percent of China's 1.945 million tonnes of annual import quotas, leaving the government with 1.362 million tonnes of quotas in addition to up to 400,000 tonnes via a government-government deal with Cuba.
The window for imports was open because import prices were currently lower than local prices, Liu told a national sugar conference in Kunming, according to a transcript of his speech posted on an industry web site (www.gsmn.com.cn). Liu, in an effort to calm rising prices, warned merchants and mills not to hoard sugar and said that higher prices could spur use of more substitutes. China's sugar consumption may not increase as much as earlier expected and may even be flat or lower than in 2010, he said. He did not give any numbers.
The government has already released 760,000 tonnes from reserves during the current marketing year, which started in October, as part of efforts to tame food inflation after sugar prices <0#CSR:> hit record highs.
The sugar market was in the sights of a government crackdown in the last months of 2010, along with corn, cotton and rubber, after speculative cash poured into Chinese futures and threatened to drive up wider inflation.
Worries about supply pushed global prices to a 30-year high in February, but subdued demand and receding supply concerns later pushed the market down by about 30 percent.
But long-run growth in Chinese consumption and imports "should ensure that the trough in the current global sugar price cycle remains higher than levels experienced following previous price spikes", analysts from the Commonwealth Bank of Australia said in a note to clients.
Australia and New Zealand Banking Group Ltd said last week that China could import up to 1.8 million tonnes within the next three or four months to capitalise on weak prices, especially from Brazil [ID:nL3E7FI0G8]
"We anticipate an elevated level of sugar imports into China this year with domestic production likely to stay weak for a second consecutive year due to adverse weather impacting Guangxi," the largest sugar region, said Barclays Capital in a written report.
Wang Ge, a divisional head from the Agriculture Ministry's crop department, forecast this year's crop at 10.5 million tonnes and said the government wanted to maintain self-sufficiency in sugar at about 85 percent, with imports at the current rate of about 2 million tonnes.
But Liu Hande, head of the Guangdong Sugar Association, forecast a wider deficit of 3 million tonnes, with output of 10.4 million-10.5 million tonnes and consumption of more than 13.5 million tonnes.
Liu said despite record sugar prices, farmers were not willing to expand sugar acreage by a big margin due to limited farmland and higher labour and production cost.
China's sugar acreage has remained steady at about 28 million mu (1.87 million hectares) over the past few years. Low-yield strains coupled with low efficiency have contributed to difficulties in raising output, Wang told the conference. (Reporting by Niu Shuping Tom Miles; Editing by Jonathan Hopfner and Ken Wills)
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