CHINA FACES DILEMMA OVER SUGAR IMPORTS

  China has to decide if it will increase
  sugar imports this year to cover falling domestic output and
  rising demand, in view of market predictions that international
  sugar prices will remain firm this year, traders and the
  official press said.
      He Kang, Minister of Agriculture, Animal Husbandry and
  Fisheries, said this week that China has adjusted the
  purchasing price for sugar cane and beet to check a drop in
  production last year but he gave no price details.
      One Japanese trader said domestic demand is rising rapidly
  because of improving living standards and rising demand for
  sweet drinks, cakes and biscuits and other sugary foods.
      "It will not be easy to cut domestic demand, even in a
  state-controlled economy. China may have to import," he said.
      Customs figures show imports fell to 1.182 mln tonnes in
  1986 from 1.909 mln in 1985 and fell to 25,165 tonnes in
  January 1987 from 54,000 in January 1986.
      The official Economic Information newspaper last month said
  production in the 1986/87 crushing season (September-April)
  will be 1.18 mln tonnes short of demand.
      The paper put 1986/87 output at 4.82 mln, down from 5.24
  mln in 1985/86, and domestic demand at about six mln tonnes.
      "In the last two years, acreage under sugar cane and beet
  has fallen, sugar mills are underutilised, output has dropped
  and cannot meet demand that is rising every day," it said.
      "The country will have to continue imports of sugar and draw
  down stocks to meet market demand," it added.
      It quoted the Ministry of Light Industry as blaming the
  drop in output on unreasonable state purchasing prices for cane
  and beet as against other crops, which has resulted in farmers
  refusing to grow them.
      The paper said in 1985 a farmer could earn up to three
  times more per hectare from pineapple and watermelon and up to
  seven times more from bananas than from sugarcane. He could
  sell grain on the free market at 560 yuan a tonne, against only
  70 yuan a tonne for sugarcane.
      Sugar mills are suffering because refined sugar prices have
  not changed for 20 years despite rising costs, it said.
      In Fujian, the cost of producing one tonne rose to 702 yuan
  in 1985 from 520.1 in 1980, cutting the mills' profit to 117
  yuan a tonne from 217.9, it added.
      The paper said unreasonable pricing resulted in 144 of the
  442 sugar mills working in the 1985/86 crushing season losing
  money. China has 521 sugar mills.
      A foreign agricultural expert forecast a drop in cane
  acreage in 1986/87 (September-August) of up to 10 pct in
  Guangdong, which produced 45 pct of China's sugar in calendar
  1985, and a smaller drop in Fujian, which produced 11 pct of
  China's sugar in calendar 1985.
      He said both provinces are more developed than other
  sugar-producing areas and more sensitive to demand from cities.
      But cane acreage in Guangxi and Yunnan, which accounted for
  28 pct of the 1985 crop, has risen by 10 to 30 pct in 1986/87,
  because cane-growing is more economic there, he said.
      He put sugar stocks at 2.333 mln tonnes in September 1986.
      A Hong Kong trader estimated stocks at more than three mln
  at end-January. "Now they are falling but (they) have not
  reached the critical level, compelling China to import quickly,"
  he said.
      "China has options not easily available in western
  countries. It controls stocks strictly and can release less
  into the consumer market if stocks fall too quickly," he said.
      The Hong Kong trader said calendar 1987 imports will be
  slightly less than those of 1986, because of firm world prices
  and serious foreign exchange constraints which, he said, are
  likely to continue until at least end-1988.
      He said nearly all cane and beet is sold to the state-owned
  mills, with a small amount sold raw to consumers.
      "Most of the mills are old and inefficient, with many of
  them using Soviet equipment imported in the 1950s," he said.
      He said demand in rural areas will in future rise an annual
  four pct, with demand in the cities rising an annual two pct.
  

