China will have to import almost the same amount of sugar this year as it did in 2004, as the gap between supply and demand is estimated to reach 1 million tons.

"Although market demand is growing steadily, output is falling," said Jia Zhiren, chairman of the China Sugar Industry Association.

The Chinese people's increasingly sweet tooth in recent years means that consumption of the sweet substance may hit 11.5 million tons this year, according to the association.

But sugar output will fall short of this. The association predicts it will reach 10.5 million tons for the 2004-05 season, Jia added.

The country's sugar crushing season starts when farmers begin harvesting their crops in October and ends in April.

A total of 1.36 million hectares of sugar cane was planted in China in the 2004-05 season, a year-on-year increase of 6,667 hectares.

But the increase in planting areas did not result in increased sugar cane output, as the crops in South China's Guangxi Zhuang Autonomous Region and Southwest China's Yunnan Province were affected by poor weather conditions.

An output of 10.5 million tons is already an optimistic estimate, according to the association, which said the collected statistics from planting areas showed it may even be as low as 10.1 million tons.

"A market gap of over 1 million tons has to be filled by imports and State reserves," Jia pointed out.

Last year, China imported 1.18 million tons of sugar, a sharp rise compared to 672,000 tons in 2003.

The low-duty quota for 2005 is 1.945 million tons, the same as last year and increasing from 1.852 million tons for 2003.

Zhu Weihua, an analyst from Merchants Securities, said market prices will determine how much of the gap will be filled by imports.

Traders are closely monitoring the high world sugar prices.

Raw sugar closed on March 14 at 9.23 US cents per pound on the New York Board of Trade, just 0.9 US cents off a four-year high. It closed last week at 8.75 US cents.

White sugar for delivery in May traded at US$257.10 per metric ton on March 24 on the London International Financial Futures and Options Exchange, up 22 per cent year-on-year.

And world market analysts said sugar prices, which have increased 27 per cent year-on-year, may get even higher as a result of record gasoline prices.

Brazil, the world's largest sugar exporter, may use more sugar cane to produce ethanol, a type of alcohol distilled from sugar cane juice, and the Brazilian Government might increase the official blend rate if the oil price remains high.

Despite the global price hike, Zhu believed imports will be the first choice to fill the gap as the government is unwilling to use up its sugar reserves.

"The only question is when to buy," he said.

The National Development and Reform Commission, which oversees the sugar market, and the China Sugar Industry Association have agreed not to use the sugar reserves if sugar price in China remains within a rational range.

Anticipation of a fall in output has caused sugar prices to soar since January.

Sugar is currently 3,000-3,200 yuan (US$362-387) per ton, up almost 20 per cent year-on-year.

(China Daily March 28, 2005)