China is believed to be making sizeable sugar imports from Latin America, giving weight to a caution from Australia & New Zealand Bank that the country's buy-ins could prove a "positive surprise" to prices.
At least 100,000 tonnes of raw sugar from Brazil and Central America is on it way to China, with a further 150,000 tonnes likely next month, soft commodities and biofuels analysis group Green Pool Commodities said.
Many investors have forecast a sharp decline in Chinese wheat imports in 2012-13, following strong domestic cane and beet harvests, with analysts pegging buy-ins falling by more than one-half to 1.6m tonnes, according to a Reuters poll.
However, strong Chinese sugar prices currently render imported Brazilian raw sugar, at 4,930 yuan a tonne, 546 yuan a tonne cheaper than domestically-produced supplies, Australia-based Green Pool Commodities said.
Indeed, at Australia & New Zealand Bank, senior ag economist Paul Deane said that the risk to ideas of low Chinese imports "increases while, as is currently the case, China's out-of quota tariff import price remains below domestic prices".
Mr Deane urged investors to "watch China's monthly trade releases, as stronger-than-anticipated import volumes could provide one of the few positives" to price hopes, which worldwide are being suppressed by ideas of a sizeable global production surpluses in 2012-13, and potentially in 2013-14 too.
The "risk" to forecast for a decline in prices lies in "overestimating the pullback in China's imports, when in fact China may still be a major buyer".
China imported more than 735,000 tonnes of sugar in the October-to-December period, the first three months of 2012-13, customs data show.
The extra 250,000 tonnes from Latin America would take total buy-ins nearly to 1m tonnes with less than half the marketing year gone.
Mr Deane said that Chinese government efforts to underpin supplies of corn, key to feeding the country's important hog herd, may help underpin demand for sugar, in quelling supplies of corn-based sweeteners, such as high fructose corn syrup (HFCS).
He added that India, the top sugar consuming country, represented another likely source of a positive surprise to sugar prices, given the deteriorating margins at sugar mills following a rise in cane prices in the important producing state of Uttar Pradesh.
"The state government's decision to increase the price paid to farmers by 16%, at a time when domestic sugar prices are falling, has left mill profitability non-existent," he said.
"Our view is Indian will be borderline self-sufficient in sugar by the middle of 2013," taking it from the league of major exporters for the first time since September 2010.
"Trends in India's sugar price and cane arrears may see India moving back to a neutral sugar trade position, which is critical to price stability."
New York raw sugar futures for March delivery stood 1.7% higher at 18.69 cents a pound at 08:00 local time (13:00 UK time).