China will buy sugar from domestic mills to refill its state reserves and prevent prices from falling further after a record harvest in the year ending September, industry officials said on Wednesday.
The central government was planning to buy at least 300,000 tonnes of sugar at 3,500 yuan ($450.3) per tonne from mills, said a senior official with the China Sugar Association. Recent frost damage to sugar cane in the country's top producing region of Guangxi was minor, and the association did not adjust its estimate on the country's sugar output, said the official.
It estimated in December output would exceed 11 million tonnes in 2006/2007 in the larger growing areas, up from 8.8 million tonnes in the previous year. "If prices fell further, it would lead many sugar mills to lose money," said the official. "The government does not want prices to fall that much."
Guangxi, which produces 60 percent of the country's sugar, also plans to purchase 400,000 tonnes from local sugar mills to support prices, local officials said. Speculation about possible frost damage and news of government purchases pushed Zhengzhou white sugar futures prices up for the second day on Wednesday. The most active contract, May 2007, ended up 2 percent at 3,732 yuan per tonne.
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