China has decided to increase processed raw sugar for state reserves by an additional 600,000 tons this year, the China Securities Journal reported.

The move is part of the government's effort to strengthen macro-control over soaring sugar prices, which have exerted pressure on lower stream industries such as food processing and beverage.

The sugar price rose in China this year with the the drop of sugar production caused by natural disasters and rising international prices, according to industry sources.

A circular jointly issued recently by the National Development and Reform Commission, the nation's pricing watchdog, and the ministries of commerce and finance, demanded local governments concerned in all areas strengthen management over sugar wholesale and futures markets to prevent speculation and hoarding for profiteering.

The China Sugar Industry Association was asked to guide sugar-producing enterprises on self-discipline and warn them of market risks for the stabilization of sugar prices.

The announced increase of state sugar reserves has brought down the rise of sugar prices in the Chinese market. In the latest auction of state sugar reserves a week ago, the price went down to 4,630 yuan (572 U.S. dollars) per ton, compared with 5,060 yuan (625 U.S. dollars) reached in the previous auction.

Some 92,000 tons of state sugar reserves was put on auction a week ago.

Chen Xiaodi, a senior analyst with the China International Futures Co. Ltd., said the lower auction price indicated that enterprises tuned down their expectations in the rise of sugar prices.

However, he said, the prices reached in the auction was not lower enough for cooling down the heated market demand, compared with the offered price of 3,800 yuan (469 U.S. dollars).

The rising sugar prices have resulted in the increase in prices of lower stream companies, such as Pepsi Cola and Coca Cola which increased the factory prices of their products to offset the rising sugar prices.

China is expected to put another 92,000 tons of state sugar reserves on auction on May 23, following by another auction of the same volume on May 30, according to industry sources.

Source: Xinhua