Sugar production amounted 11.51 million tons by end of July in this campaign in China

By CnAgri2012-08-28 12:57:36 Print

Sugar production had amounted to 11.51 million tons till the end of July in this campaign, less than the previously forecasted 12 million tons by the association. Till the end of July 8.64 million tons had been sold, down 100,000 tons year on year. If the amount delivered by the companies to the national reserve is deducted, the actual sales amount was 600,000 tons less year on year and the stock of sugar producers was 1.16 million tons more year on year.

However we deem there is demand for the price to rally in the near future owing to the following factors: the national policy on procurement for the reserve may ease the stock pressure to a large extent; there is still two months to go to see the comprehensive kicking off of crushing of the sugar plants in the South, stock shall shrink and plants have no reason to sell at a price lower than cost. Till the end of July sugar plants had 2.85 million tons stock, the stock is foreseen to be around 1.5 million tons in August and September. In the end of September the stock shall be 1.85-1.5=0.85 million ton with consideration of 500,000 tons procurement for the reserve. This amount of stock shall be sold in the next campaign, while the full-scale kicking off of crushing in the South shall be in late November, the spot price shall keep at a high level.

Currently forecast on production and cane procurement price are the most important factors affecting sugar price in the next campaign. Of which the announcement of cane procurement price shall firstly cause a big impact on sugar price. We do not think the Government should lower the cane procurement price by a large margin, otherwise the interest of cane growers shall be hurt. However cane acreage shall grow extensively if the cane price is not lowered, and there shall be surplus sugar production. This is really a hard issue.

In terms of sugar import, since sugar import in this year has basically reached the quota and there has been a sharp shrinkage between domestic and foreign price, hence there shall be a drastic decline of import in the future. Also, the current sugar sales data reflects the impact from import to the domestic market, so the impact should not be magnified in the near future.

In conclusion, sugar price shall rally before the start of the new campaign, whereas the growth rate shall depend on the sales data in August and September and announcement on cane procurement price.  

From "China Sugar Market Monthly Report"