Sugar Annual 2011

An Expert's View about Sugar and Support Services in China

Last updated: 27 Apr 2011

For MY 2011/12, total sugar production is forecast at 12 MMT (raw value), up 6 percent from the current year on increased planted acreage.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 4/15/2011 GAIN Report Number: CH11019 China - Peoples Republic of Sugar Annual 2011 Annual Approved By: Scott Sindelar Prepared By: Joshua Emmanuel Lagos and Jiang Junyang Report Highlights: For MY 2011/12, total sugar production is forecast at 12 MMT (raw value), up 6 percent from the current year on increased planted acreage. In MY 2010/11 total sugar production is estimated at 11.3 MMT (raw value), down 1 percent due to frost damage and low temperatures. MY 2010/11 and MY 2011/12 sugar consumption is forecast at 13.9 and 13.6 MMT (raw value), respectively, falling approximately 2 to 3 percent due to increased starch sweetener utilization. Executive Summary: For MY 2011/12, total sugar production is forecast at 12 MMT (raw value), up 6 percent from the current year on increased planted acreage. In MY 2010/11 total sugar production is estimated at 11.3 MMT (raw value), down 1 percent due to frost damage and low temperatures. MY 2010/11 and MY 2011/12 sugar consumption is forecast at 13.9 and 13.6 MMT (raw value), respectively, falling approximately 2 to 3 percent due to increased starch sweetener utilization. Centrifugal Sugar Production For MY 2011/12, total sugar production is forecast at 12 MMT (raw value), up 6 percent from the current year on higher planted acreage. More specifically, sugar cane and sugar beet production is projected at 11 MMT and 1 MMT (raw value), respectively, rising 5 and 16 percent. In MY 2010/11 total sugar production is estimated at 11.3 MMT (raw value), down 1 percent due to frost damage and low temperatures. Guangxi, Yunnan, Guangdong, Hainan and Xinjiang are the top 5 sugar producing provinces (beet and sugar cane), accounting for 95 percent of China?s total sugar production (5 year average) . Sugar beet and cane crushing starts in October and November. According to industry contacts, the crushing season normally lasts 120 days. Sugar Cane For MY 2011/12, sugar cane area and yield is forecast at 1.87 million hectares (ha) and 70 tons per ha, up 5 and 3 percent from last year. Although some industry contacts initially thought that low spring temperatures in southern China would affect plant yields, recent warmer temperatures and adequate soil moisture have alleviated many concerns. Sugar cane accounts for 87 percent of China?s total sugar cane and beet area. Guangxi is the largest sugar cane producing province (64 percent of China?s total sugar cane production), followed by Yunnan, Guangdong, and Hainan provinces. In order to encourage production, sugar cane mills voluntarily offer financial assistance to cane farmers, such as discounted fertilizer or subsidized agricultural equipment. This year some sugar mills provided free or subsidized plastic covering to protect the crop from colder temperatures (for more information see GAIN CH10057 and CH10015). Local media reported that the Australian government is collaborating with provincial agricultural departments to research and develop new sugar cane varieties to resolve ongoing challenges, such as seed degradation, that limit higher production potential (for further information on ongoing production challenges see GAIN CH10015). However, the process can take at least 5 to 10 years. Agricultural costs continue to rise. For MY 2010/11, agricultural chemicals and fuel are estimated to increase 10 percent. On-farm wages rose around 50 percent to attract seasonal labor since many workers have started moving to the cities to find higher paying jobs. Average production costs increased 56 percent to USD $923 per ton. The Guangxi provincial government is developing draft legislation specifically for the sugar cane sector. The main points include: Sugar mills must not raise purchasing prices to compete for product with other mills. New sugar mills must pass stricter environmental requirements and have a crushing capacity no less than 5,000 tons per day. Older mills will also have to upgrade their facilities to meet the new environmental requirements. Sugar mills are required to set aside funding to further develop nearby local farming communities. The provincial government sets a sugar cane guidance price that all sugar cane mills are expected to offer throughout the year. In cases where the market price rises above the government guidance price, sugar mills traditionally have either given farmers a bonus or raised the price voluntarily to match market rates. In MY 2010/11 the average sugar price rose 35 percent to USD $70.30 per MT (RMB 456 per MT) from the previous year due to less total supplies and continued strong demand. For MY 2011/12, provincial government guidance prices are expected to rise to promote increased acreage. Purchase Price of Sugar Cane in Major Producing Provinces RMB per MT (USD $1.00 = RMB 6.80) Guangxi Yunnan Guangdong Hainan MY 05/06 220 170 200 175 MY 06/07 270 202 303 206 MY 07/08 270 202 287 265 MY 08/09 275 231 245 268 MY 09/10 350 280 400-410 270 MY 10/11 482 350 540-550 450 Industry Sources Sugar Beets For MY 2011/12, sugar beet area is forecast at 285,000 ha, up 10 percent from last year. Xinjiang, Heilongjiang, and Inner Mongolia comprise approximately 90 percent of China?s total sugar beet output. For MY 2010/11, yield is projected to be 3 percent lower. There is no provincial government sugar beet guidance price. In MY 2010/11, the contracting price averaged around USD $67.20 per ton (RMB 436 per ton), 36 percent higher than the previous year. In MY 2011/12, sugar mills in Xinjiang and Heilongjiang announced they planned to raise the sugar beet purchasing price by 20 and 15 percent to encourage farmers to boost planting area. Purchase Price of Sugar Beets in Major Producing Provinces RMB per MT (USD $1.00 = RMB 6.8) Xinjiang Heilongjiang Inner Mongolia MY 05/06 240 280-320 260-300 MY 06/07 260 310-340 300-350 MY 07/08 230-260 320-360 310-330 MY 08/09 300-330 320-370 320-340 MY 09/10 280 320-370 320-360 MY 10/11 380 480 450 MY 11/12 420-490 550 Industry Sources Consumption MY 2010/11 and MY 2011/12 sugar consumption is forecast at 13.9 and 13.6 MMT (raw value), respectively, dropping approximately 2 to 3 percent on increased starch sweetener utilization. Demand from the processed food, beverage, and catering sector has risen on average 10 percent each year, which placed pressure on domestic cane/beet sugar supplies and caused prices to rise. As a result, more businesses have begun substituting cane/beet sugar with starch sugar. For instance, according to industry sources, a few businesses have replaced 50 and 90 percent of the total sugar content in coca mix and moon cakes with starch sugar. According to the 2011 China Sugar Association report, MY 2009/10 per capita cane/beet sugar consumption is estimated at 11 kg (raw value). Food processing, beverage, and pharmaceutical industries are the largest sugar consumers, accounting for 65 percent of total sugar consumption. The remaining 35% is at the household and food service level. Trade MY 2011/12 sugar imports are forecast at 1.6 MMT, unchanged from last year on strong demand and low total sugar supplies. After the crushing season ends, import sales are generally higher because it is more price competitive. Private traders consider the timing of state sugar reserve auctions before purchasing sugar imports, as this can affect their overall profit margins. The CY 2010 TRQ is 1.95 MMT, with an in-quota-tariff of 15 percent. The CY 2010 out-of-quota tariff rate is 50 percent. Since 2005, the quota and tariff rate have not changed. As stipulated in China?s WTO accession agreement, 30 percent of the TRQ (585,000 MT) is reserved for non-state trading enterprises and the remaining 70 percent is assigned to state trading enterprises. Many industry sources believe that the quota allocations by themselves are insufficient to procure a Panamax vessel, which require pooling in order to get a competitive shipping rate. Each year China imports about 450,000 MT of raw sugar (state trade) from Cuba under a longstanding bilateral agreement signed in the 1950?s. In March 2011, the first CY 2011 shipment of Cuban sugar landed in Tianjin. Stocks For MY 2011/12, ending stocks are forecast at 1.7 MMT (raw value), 200,000 tons higher than last year. Stocks include state, industrial, commercial, and distribution sector reserves. In MY 2010/11 strong demand and lower than average production (5 year average) caused stock levels to drop 800,000 tons from the previous year. The central and provincial governments manage reserves to stabilize market prices and ensure adequate supplies. The National Development and Reform Commission is the lead agency that decides on the scale and the timing of purchases and auctions (For more information see GAIN CH10057 or CH10015). For MY 2010/11, by March the government auctioned 770,000 tons of sugar to mitigate price rises. Auctions of State Sugar Reserves (tons) in MY 09/10 Date Quantity Average Price (RMB) 12/10/2009 200,000 4,945 12/21/2010 300,000 4,672 01/21/2010 360,000 4,797 03/05/2010 260,000 5,437 04/28/2010 100,000 4,945 07/06/2010 100,000 5,248 08/12//2010 150,000 5,417 09/09/2010 240,000 5,662 Total in MY09/10 1,710,000 Auctions of State Sugar Reserves (tons) in MY 10/11 Date Quantity Average Price(in RMB) 10/22/2010 220,000 6,681 11/22/2010 200,000 6,296 12/22/2010 200,000 6,867 02/28/2011 150,000 7,424 Total to date 770,000 Other Sweeteners Saccharine The China Sugar Association (CSA) (a government entity) limits domestic saccharine sales to promote domestic sugar cane and beet production, which ultimately benefits local farmers. Because of these restrictions, China annually exports more than it consumes. The CSA has not released 2010 data, but in 2009 it reported that China produced 15,403 MT of saccharine, of which 12,601 MT was exported. Domestic saccharine sales increased 25 percent to 2,794 MT due to high sugar cane and beet prices. Industry sources believe there are unmonitored sales that are not officially reported. Currently, only 4 saccharine plants are licensed for operation. In 2008, the central government closed 1 plant in Suzhou City to reduce pollution levels in the Taihu Lake region. The plants are required to regularly report their operational activities to CSA, including production, domestic and export sales, and stock levels. In 2010, a few entrepreneurs illegally opened a few small plants in Henan and Hubei province to take advantage of high domestic sugar prices. The CSA led an investigation and advised the central government to close the plants, but it is unknown if the plants were shut-down. Starched-based Sweeteners In CY 2011 industry sources report that starch sugar production will rise over 10 percent to 9 MMT (the US produced 35 MMT during the same year), and has grown on average 13 percent annually for the last 5 years. For CY 2010, starch sugar production rose 15 percent. Shandong, Hebei and Jilin province are the top 3 starch sweetener producing provinces, comprising over 85 percent of China?s total output. In the last few years, high sugar cane and beet prices caused starch sugar usage to grow. Major starch sugar end-users include the beverage, food processing, and pharmacy sector. High international sugar prices also caused starch sugar exports to rise in recent years. In CY 2010, exports reached 820,000 tons, up 32% from the previous year. Tables Production, Supply, and Demand (PSD) Tables Table 1. Centrifugal Sugar Sugar, Centrifugal C 2009/2010 2010/2011 2011/2012 hina Market Year Market Year Market Year Begin: Oct 2009 Begin: Oct 2010 Begin: Oct 2011 USDA New USDA New USDA New Official Post Official Post Official Post Beginning Stocks 3,784 3,784 1,900 2,355 1,514 (1000 MT) Beet Sugar Production 652 652 950 863 1,000 (1000 MT) Cane Sugar Production 10,848 10,777 11,720 10,440 11,000 (1000 MT) Total Sugar Production 11,500 11,429 12,670 11,303 12,000 (1000 MT) Raw Imports 1,300 1,342 1,600 1,600 1,600 (1000 MT) Refined Imp.(Raw Val) 200 193 200 220 250 (1000 MT) Total Imports 1,500 1,535 1,800 1,820 1,850 (1000 MT) Total Supply 16,784 16,748 16,370 15,478 15,364 (1000 MT) Raw Exports 4 4 5 4 4 (1000 MT) Refined Exp.(Raw Val) 90 89 50 60 60 (1000 MT) Total Exports 94 93 55 64 64 (1000 MT) Human Dom. Consumption 14,790 14,300 15,100 13,900 13,600 (1000 MT) Other Disappearance 0 0 (1000 MT) Total Use 14,790 14,300 15,100 13,900 13,600 (1000 MT) Ending Stocks 1,900 2,355 1,215 1,514 1,700 (1000 MT) Total Distribution 16,784 16,748 16,370 15,478 15,364 (1000 MT) Table 2. Sugar Cane Sugar Beets C 2009/2010 2010/2011 2011/2012 hina Market Year Market Year Market Year Begin: Jan 2010 Begin: Jan 2011 Begin: Jan 2012 USDA New USDA New USDA New Official Post Official Post Official Post Area Planted 186 260 285 (1000 HA) Area Harvested 186 260 285 (1000 HA) Production 7,179 9,800 11,000 (1000 MT) Total Supply 7,179 9,800 11,000 (1000 MT) Utilization for Sugar 7,179 9,800 11,000 (1000 MT) Utilizatn for Alcohol 0 (1000 MT) Total Distribution 7,179 9,800 11,000 (1000 MT) Table 3. Sugar Beets Sugar Cane for Centrifugal C 2009/2010 2010/2011 2011/2012 hina Market Year Begin: Market Year Begin: Market Year Begin: Oct 2009 Oct 2010 Oct 2011 USDA New USDA New USDA New Official Post Official Post Official Post Area Planted 1,709 1,698 1,846 1,780 1,870 (1000 HA) Area Harvested 1,709 1,698 1,846 1,780 1,870 (1000 HA) Production 112,000 115,587 130,000 124,000 130,000 (1000 MT) Total Supply 112,000 115,587 130,000 124,000 130,000 (1000 MT) Utilization for Sugar 112,000 115,587 130,000 124,000 130,000 (1000 MT) Utilizatn for Alcohol 0 0 (1000 MT) Total Utilization 112,000 115,587 130,000 124,000 130,000 (1000 MT) Price Table Table 4. Wholesale Price of Grade 1 Granulated Sugar in Guangxi Province RMB per MT (USD $1.00=RMB 6.8) Month 2007 2008 2009 2010 2011 January 3,656 3,442 2,828 5025 6961 February 3,599 3,657 3,045 5236 7213 March 3,760 3,528 3,478 5244 April 3,723 3,360 3,579 5129 May 3,639 3,250 3,753 4981 June 3,576 3,216 3,786 5017 July 3,476 3,081 3,770 5130 August 3,867 2,802 3,986 5339 September 3,736 2,751 4,052 5578 October 3,925 2,746 4,110 6410 November 3,595 2,911 4,246 6924 December 3,498 2,905 4,793 6832 Yearly Average 3,671 3,137 3,786 5025 Source: Guangxi Sugar Exchange Center Website: www.chinasugarmarket.com Trade Tables Table 5. China's Sugar Imports by Origin - MY 2009/2010 (MT) Country Oct-Dec Jan-Mar Apr-Jun Jul-Sept MY Total World 111,978 88,959 319,575 956,677 1,477,189 Brazil 45,595 100 49,482 726,942 822,119 Korea South 38,456 21,476 42,497 44,814 147,243 Cuba 23,000 60,000 163,625 121,500 368,125 United Kingdom 0 2,486 638 1,738 4,862 Australia 247 571 2,500 57,253 60,571 Poland 0 0 240 0 240 Colombia 0 0 26 3 29 Malaysia 183 22 22 0 227 Thailand 4,276 2,312 3,803 1,925 12,316 New Zealand 0 0 0 0 0 Mauritius 0 10 42 195 247 Argentina 48 50 48 0 146 United Arab Emirates 0 0 0 25 25 India 0 0 0 0 0 Others 173 1,932 56,652 2,282 61,039 Source: China Customs Table 6. China's Sugar Imports by Origin - MY 2010/2011 (MT) Country Oct-Dec Jan-Mar Apr-Jun Jul-Sept MY Total World 400,904 400,904 Brazil 312,940 312,940 Korea South 46,300 46,300 Cuba 24,875 24,875 United Kingdom 4,026 4,026 Australia 3,676 3,676 Poland 2,928 2,928 Colombia 2,080 2,080 Malaysia 1,519 1,519 Thailand 1,394 1,394 New Zealand 682 682 Mauritius 152 152 Argentina 122 122 United Arab Emirates 75 75 India 52 52 Others 83 83 Source: China Customs Table 7. China's Sugar Exports by Destination - MY 2009/2010 (MT) Country Oct-Dec Jan-Mar Apr-Jun Jul-Sept MY Total World 15,045 33,990 23,170 14,472 86,677 Hong Kong 7,460 7,303 6,541 8,343 29,647 Mongolia 300 2,450 0 256 3,006 Malaysia 1,033 3,261 1,987 1,107 7,388 Singapore 2,104 274 1,622 1,009 5,009 Kuwait 18 5 5 9 37 United States 1,109 343 1,023 763 3,238 Saudi Arabia 76 1,555 134 96 1,861 Yemen 147 105 168 74 494 Korea North 90 234 1,161 931 2,416 Canada 325 264 489 156 1,234 Egypt 114 132 179 144 569 Japan 60 1,352 2,100 237 3,749 Macau 115 231 121 204 671 Others 2,094 16,481 7,640 1,143 27,358 Table 8. China's Sugar Exports by Destination - MY 2010/2011 (MT) Country Oct-Dec Jan-Mar Apr-Jun Jul-Sept MY Total World 22,716 22,716 Hong Kong 7,748 7,748 Mongolia 4,709 4,709 Malaysia 3,504 3,504 Singapore 2,516 2,516 Kuwait 1,000 1,000 United States 878 878 Saudi Arabia 520 520 Yemen 271 271 Korea North 257 257 Canada 235 235 Egypt 192 192 Japan 178 178 Macau 143 143 Others 565 565
Posted: 26 April 2011, last updated 27 April 2011

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