Chinese sugar output to fall further than thought

(Agrimoney) – China’s sugar production is to fall even further than had been thought in the newly-started season, as low prices deter production, but the decline will not be enough to prevent much-watched imports dropping to a four-year low.

Chinese sugar output will drop by nearly 1.0m tonnes to 13.3m tonnes in 2014-15, which started this month, the US Department of Agriculture’s Beijing bureau said.

The production estimate is 400,000 tonnes more than the USDA’s official forecast, reflecting ideas that “lower sugar prices have caused returns on cane to fall below [those of] competing crops, such as fruits or cassava,” the bureau said.

“Sugar cane acreage in Guangxi reportedly declined 7%, while acreage in Hainan fell by over 20%.”

‘Shorter cane’

Nonetheless, the forecast is above that from many other commentators, with Platts Kingsman lsat week estimating Chinese sugar output this season at 13.04m tonnes, also on a raw-sugar-equivalent basis.

The Swiss-based analysis group cited damage from typhoons which have hit China’s south eastern cane-growing areas, besides the intelligence that “the emergence rate of cane in the main planting areas was lower year on year”, and with plants now seen “shorter than at the same time last year”.

Two weeks ago, Green Pool estimated Chinese output at 12m tonnes, albeit on a tel quell basis, noting “less-than-ideal weather and some typhoon damage”.

However, “any excitement” that such an estimate may spark, coming in well behind consumption it estimated at 15.4m tonnes tel quell, and which the USDA pegs at 17.4m tonnes raw value, “is quelled by the realisation that China’s stocks of sugar are enormous”, Australia-based Green Pool added.

Import prospects

Indeed, while the USDA bureau lifted its forecast for Chinese sugar imports by 500,000 tonnes to 3.80m tonnes, this would remain, just, the lowest since 2010-11, and down 300,000 tonnes year on year.

Many sugar bulls have been hoping for stronger-than-expected purchases by China, or Russia, another major importer, to make a dent in the large inventories of the sweetener built up by four successive seasons of world production surplus.

The data came as China revealed it was keeping its low-tariff sugar import quota at 1.95m tonnes in 2015, the same level it has been for more than a decade.

“Sugar imports in recent market years have consistently exceeded the annual tariff rate quota as high domestic prices have made it profitable to import sugar despite high tariffs,” the bureau said.

“Sugar mills have struggled to remain profitable, and are lobbying the government to increase the out-of-quota tariff to 60% from the current rate of 50%.”