China plans to sell 400,000 tons of sugar from its reserves to stabilize rising prices, which have surged since November as natural disasters reduced local output.

The country may need as much as 9.3 million tons of sugar this year, meaning there will likely be a shortage of more than 1 million tons, said Wang Haining, secretary-general of China Food Association's sweetener branch.

The central government is rumoured to have approved a plan to inject 1.2 million tons of reserve sugar into the local market this year.

This is a strategic way to stabilize the prices, signalling to the market that the government is determined to curb the rising trend, said Yang Jing, a sugar futures analyst from the JZ Futures Co.

Half of the sugar will come directly from the country's current reserves and the rest will be imported Cuba sugar, which will arrive at Chinese ports soon. The sugar will be sold "at an appropriate time in the near future," according to a statement issued by the National Development and Reform Commission and the Ministry of Commerce.

Yang said market prices will be a determining factor in the government's decision on when to sell.

But news of the government's intervention into the market will likely stop traders piling up stocks and continuing push up prices, she said.

China sold 184,000 tons of sugar in two auctions in January, but the efforts to counteract rising sugar prices have had little influence.

Sugar prices in major producing regions such as Yunnan Province and the Guangxi Zhuang Autonomous Region were quoted around 5,000 yuan (US$617) every ton yesterday, compared to an average price of around 4,300 yuan (US$531).

White sugar futures for May delivery gained 47 yuan, or 0.9 per cent, to 5,136 yuan (US$639) a ton yesterday on China's Zhengzhou Commodity Exchange. The contract has gained 7.7 per cent since trading began on January 9.

The government's statement asked sugar manufacturers not to stockpile the commodity.

"Sugar producers need to be alert to market risk and be ready to sell their products in a timely manner," the statement said.

Raw sugar futures in New York are hitting a record high as the global demand will also skyrockets this year and Brazil, the world's biggest producer, is expected to use more sugar cane to make automotive fuels.

According to the Ministry of Commerce, the average retail price of sugar stood at 5.7 yuan (70 US cents) a kilogram in February, up 3.49 per cent and 12.9 per cent respectively over last month and the same period of last year.

Source: China Daily