The Ministry of Commerce (MOFCOM) said last Thursday
it would sell 184,000 tons of sugar from state reserves this
month in two auctions in a bid to lower rocketing prices.
Half of the sugar reserves will be auctioned tomorrow and the
other half on January 16, according to a press release from the
ministry.
The lowest auction price will be 3,800 yuan (US$469) a ton.
Sugar prices on the domestic market stood at around 4,500 yuan
(US$556) a ton on December 30.
Sugar prices rose by 60 percent, or 1,000 yuan (US$123), in
November compared with the same period of 2004.
The reserve to be auctioned is finished sugar processed by nine
companies, which won the contract to refine the sugar from the
National Development and Reform Commission (NDRC) and the MOFCOM.
The MOFCOM and the NDRC last month decided to process a certain
amount of raw sugar from reserves into finished sugar as quickly as
possible so it could be sold.
An MOFCOM official said the recent sugar price surge was partly
attributed to delays in the processing of sugarcane in south
China.
This triggered market speculation and resulted in sugar
producers becoming unwilling to sell their products as they waited
for prices to rise.
Analysts predict the coming auctions will have an immediate
impact on soaring sugar prices, but the effect is unlikely to last
as the country's increasing demands still outpace production.
The gap between demand and supply is about 1 million tons.
But Chen Xin, a futures analyst from Jinpeng Futures, said the
auctions are not good news for the new sugar futures.
The Zhengzhou Commodity Exchange is scheduled to start trading
refined white sugar futures on Friday.
"A large amount of low-priced sugar on the market is not a good
opening for futures trading," he said.
In the long term, he believes the trading of white sugar futures
will help perfect China's market for the product, improve the
pricing mechanism and help companies avoid risk.
(China Daily January 4, 2006)