22nd Oct 2012, by Agrimoney
US officials lowered the bar on hopes for China's much-watched sugar imports, flagging the potential for government pressure to curtail buy-ins, whatever the underlying economics.
The US Department of Agriculture's Beijing bureau estimated China's sugar imports in the 2012-13 marketing year, starting this month, at 1.0m tonnes, a slump of more than 75% year on year on its numbers.
The figure is also 1.5m tonnes below the official USDA estimate, and a market consensus of 1.6m tonnes, according to a poll of analysts two weeks ago.
Sugar merchant Czarnikow last week estimated China's 2012-13 imports at 1.5m tonnes while adding that "if demand growth is stunted by sugar prices remaining high relative to alternative calorific sweeteners then import needs could be lower still".
Margin signals
The USDA bureau acknowledged the support to Chinese sugar imports from a quota system which allows imports of 1.945m tonnes in at a 15% tariff, with 50% levied on buy-ins beyond that level.
With domestic sugar prices supported by state purchases, with China last month starting stockpiling 500,000 tonnes of sugar from domestic producers at a minimum of 6,200 yuan per tonne, this has meant large premiums over international values which have only encouraged imports.
Indeed, in 2011-12, "the price spread between domestic and imported sugar was so large that out-of-quota tariff rate of 50% and still earned profits", the bureau said in a report.
"Reportedly, in the first half of calendar 2012, profit margins for in-quota imports ranged from 500-1,500 yuan per tonne."
'Restrict or discourage'
And in 2012-13, bureau officials said that "if domestic sugar prices remain strong, relatively lower international sugar prices may continue to stimulate further imports, even out of quota imports".
However, they also flagged the impact from a rise in China's own sugar output forecast at 18% in 2012-13, taking it to 14.6m tonnes, lifted by increases in both cane and beet production
"Higher domestic sugar supplies may cause prices to ease and increase overall demand for domestically produced sugar.
"Industry sources also believe the Chinese government may try to restrict or discourage imports in order to support domestic sugar mills."
Part of the import quota of 1.945m tonnes is allocated to state-owned enterprises, "which may decide not to import sugar", the report said.
Market indicator
China's appetite for sugar imports, which had been on an upward trend thanks to rising demand and a succession of disappointing harvests, is seen as a major determinant of world sugar prices ahead, in its ability to mop up growing world production.
Raw sugar for March stood 0.4% lower at 20.15 cents a pound in late deals in New York.
US officials lowered the bar on hopes for China's much-watched sugar imports, flagging the potential for government pressure to curtail buy-ins, whatever the underlying economics.
The US Department of Agriculture's Beijing bureau estimated China's sugar imports in the 2012-13 marketing year, starting this month, at 1.0m tonnes, a slump of more than 75% year on year on its numbers.
The figure is also 1.5m tonnes below the official USDA estimate, and a market consensus of 1.6m tonnes, according to a poll of analysts two weeks ago.
Sugar merchant Czarnikow last week estimated China's 2012-13 imports at 1.5m tonnes while adding that "if demand growth is stunted by sugar prices remaining high relative to alternative calorific sweeteners then import needs could be lower still".
Margin signals
The USDA bureau acknowledged the support to Chinese sugar imports from a quota system which allows imports of 1.945m tonnes in at a 15% tariff, with 50% levied on buy-ins beyond that level.
With domestic sugar prices supported by state purchases, with China last month starting stockpiling 500,000 tonnes of sugar from domestic producers at a minimum of 6,200 yuan per tonne, this has meant large premiums over international values which have only encouraged imports.
Indeed, in 2011-12, "the price spread between domestic and imported sugar was so large that out-of-quota tariff rate of 50% and still earned profits", the bureau said in a report.
"Reportedly, in the first half of calendar 2012, profit margins for in-quota imports ranged from 500-1,500 yuan per tonne."
'Restrict or discourage'
And in 2012-13, bureau officials said that "if domestic sugar prices remain strong, relatively lower international sugar prices may continue to stimulate further imports, even out of quota imports".
However, they also flagged the impact from a rise in China's own sugar output forecast at 18% in 2012-13, taking it to 14.6m tonnes, lifted by increases in both cane and beet production
"Higher domestic sugar supplies may cause prices to ease and increase overall demand for domestically produced sugar.
"Industry sources also believe the Chinese government may try to restrict or discourage imports in order to support domestic sugar mills."
Part of the import quota of 1.945m tonnes is allocated to state-owned enterprises, "which may decide not to import sugar", the report said.
Market indicator
China's appetite for sugar imports, which had been on an upward trend thanks to rising demand and a succession of disappointing harvests, is seen as a major determinant of world sugar prices ahead, in its ability to mop up growing world production.
Raw sugar for March stood 0.4% lower at 20.15 cents a pound in late deals in New York.
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