Bloomberg News

Armajaro Sees Chinese Sugar Imports Falling on Bigger Local Crop

August 16, 2012

Sugar imports into China, the world’s second-biggest consumer, will drop by about 1 million metric tons in the season that starts in October as the country harvests a bigger crop, according to Armajaro Trading Group Ltd.

China’s imports will drop to about 1.97 million tons in 2012-13 from just under 3 million tons this season, said Guy Toller, head of sugar trading at the London-based company. Production there will rise to at least 12.5 million tons next season from 11.5 million tons this year, Armajaro estimates.

“Their crop is looking very good,” Toller said in an interview at the company’s office in London today. “With a much bigger crop and domestic prices indicating stagnant consumption, we think there will be substantially smaller imports.”

Chinese buyers sold some of the sugar they bought for the third quarter back to the market, he said. Sugar imports into the country are unlikely to match this season’s levels unless high corn prices result in “a big switch from alternative sweeteners back into sugar,” he said. Corn, used to make sweeteners, has climbed 59 percent since June 15 because of the worst drought in the U.S. since 1956.

The sugar cane crop in India, the world’s second-biggest producer and largest consumer, will drop to 24 million tons in 2012-13, Armajaro estimates. That compares with 26 million tons in the current season, Toller said. India’s rain deficit was 15 percent of the 50-year average as of yesterday, compared with 19 percent at the end of July, the India Meteorological Department said.

“The lack of rainfall is possibly not as bad as it was but is still not good,” Toller said. “The issues to watch from here on are if they get rains in Tamil Nandu and how bad Maharashtra is. The rest of it looks pretty good.”

Indian Consumption

Consumption in India will rise 500,000 tons to 23.6 million tons next season, while stockpiles at the end of the current season are estimated at 5 million tons, Toller said. The country is unlikely to export any more sweetener as higher domestic prices have made shipping it unfavorable.

“If domestic prices hold within a 5 percent range of where they are now, we don’t see an incentive for export,” Toller said. “India shouldn’t be a net importer, but if they happen to have very low stocks, and estimates vary from 1.5 million to 7 million tons as of the end of September, and food security is an issue for the government, all this could change very quickly.”

Diwali Festival

The crop there may be delayed because Diwali, the festival of lights celebrated by Hindus, will be celebrated later this year, he said. Diwali will start Nov. 13 compared with Oct. 26 last year. Sugar consumption usually increases during the period as people consume sweets made of milk, milk derivatives and sugar and local sweets are also distributed as gifts. The Indian government usually asks mills to sell more sugar for Diwali.

“The Diwali is extremely late and it may be difficult to get cane cutters to come and start the crop, so it could be a late start,” Toller said. “One factor that has helped the domestic market is that the Diwali is so late and all the festival consumption will be out of last season’s production.”

Global sugar supplies will outpace demand by 4.5 million tons in 2012-13, Toller estimates. Prices are unlikely to stay below 20 cents a pound even with a global surplus until there is more certainty about the size of the crop in India and top grower Brazil, he said.

To contact the reporter on this story: Isis Almeida in London at

To contact the editor responsible for this story: Claudia Carpenter at

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