China is planning to sell additional sugar from state reserves, bringing its total sales for this year past its original target of 1.1 million tonnes as prices remain stubbornly high.
The commerce ministry would auction 80,000 tonnes of raw sugar with an initial bidding price of 3,400 yuan per tonne to sugar mills next week as physical prices remain higher than expected after the Mid-Autumn Festival, which fell last week.
Beijing had earlier said it would sell about 1.1 million tonnes this year from state reserves, a figure reached in mid-September through a series of white sugar auctions.
"There is a supply deficit in the south and the government has no more white sugar reserves for the market," said a trader. The reserve sales strive to balance the domestic market at a level that ensures income for farmers in poor, cane-growing regions but at the same time prevents food and beverage firms from turning to other, cheaper sweeteners.
"The auction is unlikely to help the price much as the sugar, after being refined, will only be available in November," said one trader. China's major sugar producing areas in the south would begin crushing and can supply new sugar in November.
White sugar in Guangxi was quoted between 4,290 to 4,320 yuan per tonne on Tuesday, a rise of 2.0 percent from before the holiday, according to Guangxi Sugar Exchange.
Sugar prices in most northern areas fell as much as 4.0 percent, as sugar mills there began operations, easing tight supplies.
Drought last year in southern areas, including Guangxi, sharply cut domestic sugar output, prompting Beijing to release the sugar from state reserves to cover the deficit this year.
Drought damage to sugarcane in Guangxi was minor so far, traders said. Nearly 80 counties in Guangxi were struck with drought, with 90,000 people having difficulty in getting sufficient drinking water supplies, the official Xinhua news agency reported on Tuesday. Average rainfall since August in the region was 50 percent less than in normal years, it quoted a local weather official as saying.
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