The rally in sugar prices, coupled with improved domestic production prospects, has dented expectations for purchases of the sweetener by China, the top importer.

The US Department of Agriculture's Beijing bureau cut to 6.0m tonnes its forecast for Chinese sugar imports in 2016-17 – ditching expectations of a rise in volumes.

Indeed, the downgraded figure was 1.9m tonnes below the USDA's official estimate.

The reduced import estimate "is a result of both higher domestic sugar cane production, a narrowing of domestic and global sugar price spreads which makes smuggling less attractive, as well as a strengthening of Chinese enforcement against illegal sugar trade," the bureau said in a report.

Production to 'rebound'

World sugar prices have soared to multi-year highs, boosted by concerns that Brazilian supplies will be smaller than thought,

The rally - in reducing their discount to China's own values, which have historically been supported by regulated cane values – has curtailed the appeal of smuggling, which the bureau has previously estimated at 1.5m-2m tonnes a year.

Meanwhile, "very attractive domestic prices", besides strong yield forecasts, prompted the bureau to raise by 12.1m tonnes to 83.7m tonnes its forecast for China's cane output in 2016-17, on an October-to-September basis.

The bureau forecast sugar production at 9.53m tonnes, up 1.2m tonnes from the previous year, and 1.3m tonnes above the USDA's official estimate.

The bureau also flagged a Chinese government probe into rising sugar imports, following complaints by its domestic industry is expected to be completed in six months.

Import pace

Indeed, the prospect of imports in 2016-17 proving flat with those a year before would represent a sharp slowdown on the recent pace of growth.

Imports in August, at 360,285 tonnes, tumbled by 31% year on year, Chinese customs data show.

Nonetheless, volumes for the first eight months of 2016, at 2.11m tonnes, remained 31% down year on year.

Fount: http://www.agrimoney.com/news/sugar-price-rally-dents-expectations-for-chinese-imports--10009.html