Sugar Annual 2012

An Expert's View about Tropical and Subtropical Fruits, Sugar Cane in China

Posted on: 27 Apr 2012

In MY 2012/13, total sugar production is forecast at 13.1 MMT (raw value), up 6 percent due to increased acreage for both sugar cane and sugar beets.

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: 4/17/2012 GAIN Report Number: CH12032 China - Peoples Republic of Sugar Annual 2012 Approved By: Scott Sindelar Prepared By: Joshua Emmanuel Lagos and Jiang Junyang Report Highlights: In MY 2012/13, total sugar production is forecast at 13.1 MMT (raw value), up 6 percent due to increased acreage for both sugar cane and sugar beets. In MY 2011/12, total sugar production is estimated at 12.3 MMT (raw value), up 10 percent because of higher acreage and strong yields. MY 2012/13 sugar imports are forecast to remain strong at 2.1 MMT (raw value). Executive Summary: In MY 2012/13, total sugar production is forecast at 13.1 MMT (raw value), up 6 percent due to increased acreage for both sugar cane and sugar beets. In MY 2011/12, total sugar production is estimated at 12.3 MMT (raw value), up 10 percent because of higher acreage and strong yields. MY 2012/13 sugar imports are forecast to remain strong at 2.1 MMT (raw value). Centrifugal Sugar Production In MY 2012/13, total sugar production is forecast at 13.1 MMT (raw value), up 6 percent due to increased acreage. Cane and beet sugar production is projected at 11.8 MMT and 1.3 MMT (raw value), rising 5 and 15 percent from the previous year. In MY 2011/12 total sugar production is estimated at 12.3 MMT (raw value), up 10 percent on higher acreage and strong yields. Usually by the end of March, the sugar beet crushing season is complete. This year, only a few sugar mills were still operating in Heilongjiang (Xinjiang, Inner Mongolia, and Hebei had finished production). For cane sugar, the crushing season usually concludes by late April. From December to March in Guangxi province, the largest cane sugar producing province, rainy weather delayed harvest and prolonged a few sugar mill operations. Sugar Cane For MY 2012/13, total sugar cane area is forecast at 1.84 million hectares (Ha), up 4 percent on high prices, which influenced some farmers to switch from less profitable crops, such as cassava. Production is projected to increase to 126 MMT on normal weather conditions and average yields. Winter sugar cane yield is expected to be below average due to low temperatures and rain from December to March (a critical period of growth). The winter cane season generally lasts from November to April. Temperature and soil moisture has been adequate for the spring sugar cane crop growing season, which lasts from March to January. In MY 2011/12, different sugar cane producing provinces had varying weather conditions that affected sugar cane content. For example, longer periods of rain in Guangxi province caused sugar content to drop 0.5 percent from last year, but this also contributed to higher yields. Alternatively, in Yunnan drought increased the sugar content but produced a lower yielding crop. Sugar mills generally do not produce their own sugar cane (although a few state plantations have their own sugar mills). In order to encourage and improve sugar cane production, sugar mill operators provide extension services to farmers to improve yields, as well as provide free or subsidized fertilizer, mechanical equipment for plowing, irrigation, and plastic film (to retain moisture and good temperatures). These benefits are also used to entice farmers to grow sugar cane in lieu of other crops such as paddy rice, corn, vegetables, or cassava. Sugar cane accounts for 87 percent of China?s total sugar area (sugar cane and sugar beets). Guangxi is the largest sugar cane producing province (64 percent of China?s total sugar cane production), followed by Yunnan, Guangdong, and Hainan provinces. Since MY 2011/12, the central government required all major sugar cane producing provinces to set a unified guidance purchase price to purchase sugar cane from farmers (previously only Guangxi province set a guidance price). If the market price rises for sugar, the sugar mill operator is obligated to pay a portion of the difference to farmers. For instance, if the guidance price of RMB 500 per ton is tied to a processed sugar price of RMB 7,000 per ton, and the processed sugar price subsequently rises RMB 100 per ton, the sugar mill operator must increase their payment to farmers by RMB 5 per ton. This pricing regime functions to guarantee a profit margin for cane farmers, but also prevents sugar mills from outbidding each other (all have to follow the guidance price). In the last few years, the sugar cane purchase price has risen due to strong domestic demand. The provincial governments have not announced a guidance purchase price for MY 2012/13. The National Development and Reform Commission works with other government agencies to formulate a guidance price based on production costs for both sugar cane farmers and mills. Purchase Price of Sugar Cane in Major Producing Provinces RMB per MT (USD $1.00 = RMB 6.30) Guangxi Yunnan Guangdong Hainan MY08/09 275 231 245 268 MY09/10 350 280 400-410 304 MY10/11 492 375 540-550 525 MY11/12 500 420 500 550 MY 12/13 is not available Source: Various Industry Sources Sugar cane production primarily relies on manual labor, as few farmers use machinery for harvesting or planting (labor dependent), although some do use tractors to plow the fields. Because of high urban wages, rural labor continues to migrate to the cities, which have caused rural labor costs to rise by more than 80 percent in some provinces. According to a Yunnan Sugar Association survey, total annual labor costs (for planting and harvesting) alone increased 66.6 percent to RMB 338.8 per mu (1 Ha=15 Mu). Overall, for MY 2011/12, total production costs are estimated to rise by at least 20 percent, which includes labor, fertilizer, and seed. In order to address rising labor costs, according to local provincial media reports, state farms and agricultural machinery companies are developing small-scale mechanized farm equipment that farmers can use on small plots of land (averages about 4 mu per household in Guangxi, or less than an acre per household). According to a Guangxi provincial government plan to increase sugar cane mechanization, by 2015 the government plans to raise farmer utilization for plowing, planting, and harvesting to 90, 25, and 20 percent, respectively. The plan also stipulates that a machinery subsidy will be given to large cane farms (previously this subsidy was only given for grain production), and supports the establishment of special cooperatives that provide mechanized planting or harvesting services. Sugar Beets For MY 2012/13, sugar beet area is forecast at 300,000 Ha, up 15 percent, and production is estimated at 13.4 MMT on average yields. Xinjiang, Heilongjiang, and Inner Mongolia comprise approximately 90 percent of China?s total sugar beet output. In order to encourage further acreage increases over other crops such as corn and tomatoes, sugar beet mills voluntarily raise the sugar beet purchase price for farmers, as well as provide extension services, tractors and other machinery, and subsidized seed and fertilizer. In Xinjiang, sugar beet mills specifically give financial assistance to large farms to encourage land consolidation. Provincial sugar beet associations are lobbying the central government to acquire more financial support. For example, because most sugar beet planting and harvesting is conducted with manual labor, associations have asked for subsidies for sugar beet planting and harvesting equipment (the request potentially applies for both domestic and imported equipment), as well as seed subsidies. The Xinjiang sugar association specifically requested for a transportation subsidy to lower the domestic shipping cost between provinces. Purchase Price of Sugar Beets in Major Producing Provinces RMB per MT (USD $1.00 = RMB 6.3) Xinjiang Heilongjiang Inner Mongolia MY 09/10 280 320-370 320-360 MY 10/11 353 400 390 MY 11/12 450 532 480-500 MY12/13 data not available Source: Various Industry Sources Consumption MY 2012/13 sugar consumption is forecast at 14.7 MMT (raw value), up 3 percent from the previous year. Rising domestic sugar prices have caused more food processors and beverage manufacturers to utilize more starch sugar (including HFCS). Trade MY 2012/13 sugar imports are forecast to remain strong at 2.1 MMT. In CY 2011, industry sources reported that the National Development and Reform Commission issued a special permit to import 1 MMT of sugar (did not charge the over-quota tariff), and most of these imports replenished the state reserve. This is the first time in a decade since China joined WTO that the government has issued such a special permit. According to the 12th five year plan (2011-2015) on Light Industry Development, the central government is targeting a sugar self-sufficiency rate of 85 percent by the end of 2015, the first time that a government document made a statement on the sugar sufficiency rate. This could be an indication that China may be increasing its sugar imports in the future. The CY 2012 TRQ is 1.95 MMT, with an in-quota-tariff rate of 15 percent. The CY 2012 over-quota tariff rate is 50 percent. Since 2005, the quota and tariff rate have not changed. Stocks For MY 2012/13, ending stocks are forecast at 2.3 MMT (raw value), rising 22 percent from the previous year, due to sugar imports reportedly entering state reserves. Industry sources believe the total state reserve capacity is around 3 MMT. In February 2012, the National Development and Reform Commission announced plans to start a temporary sugar reserve program. In order to provide sugar mills with a higher profit margin during the low part of the season (usually at the beginning of the crushing period), the government will purchase 1 MMT of sugar at an elevated price (higher than the market price). For example, the purchase price is set at RMB 6550 per ton (in Guangxi). The National Development and Reform Commission, Ministry of Trade and Commerce, Ministry of Finance, and Agricultural Development Bank jointly implement this program. By March 2012, less than 500,000 tons of sugar has been purchased. Because the temporary sugar reserve acquires sugar at a higher market rate, it may have the unintended effect of keeping consumer sugar prices elevated. Moreover, it might also exacerbate the substitution of High Fructose Corn Syrup (HFCS) (see Starch-based Sweeteners section). 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). Other Sweeteners Saccharine The CSA limits domestic saccharine sales to promote domestic sugar consumption for the benefit of sugar mills and sugar farmers, as well as supervises and inspects the production activities of saccharine plants that operate in China (there are currently only 5 plants). For 2011, the CSA has not announced the domestic saccharine production and export data. Industry sources believe these 5 plants annually sell more saccharine than what is reported to CSA. According to various state media, misuse or excessive use of saccharine or other artificial sweeteners are frequently detected by provincial food safety and quality inspection agencies. CSA states it will continue working closely with other government agencies to restrict the illegal sale and domestic use of saccharine and other artificial sweeteners. Starched-based Sweeteners For CY 2011, CSA has not yet announced an estimate for total starch sugar production. Industry sources estimate that in CY 2011 corn starch sugar production increased 15 percent, and is expected to remain strong for next year. In the last few years, the confectionary, dairy, beverage, food processing, and pharmaceutical sector have continued to substitute sugar for corn starch sugar due to high sugar prices. Tables Production, Supply, and Demand (PSD) Tables Table 1. Centrifugal Sugar Sugar, Centrifugal C 2010/2011 2011/2012 2012/2013 hina Market Year Begin: Oct Market Year Begin: Oct Market Year Begin: Oct 2010 2011 2012 USDA New USDA New (1000 HA) (1000 MT) O Official New Post fficial Post Official P USDA ost Beginning Stocks 2,355 2,355 1,607 1,621 1,891 Beet Sugar Production 863 863 990 1,100 1,265 Cane Sugar Production 10,336 10,336 10,850 11,224 11,800 Total Sugar Production 11,199 11,199 11,840 12,324 13,065 Raw Imports 1,850 1,837 1,950 2,000 1,800 Refined Imp.(Raw Val) 280 306 250 300 300 Total Imports 2,130 2,143 2,200 2,300 2,100 Total Supply 15,684 15,697 15,647 16,245 17,056 Raw Exports 5 5 4 4 4 Refined Exp.(Raw Val) 72 71 70 50 50 Total Exports 77 76 74 54 54 Human Dom. Consumption 14,000 14,000 14,300 14,300 14,700 Other Disappearance 0 0 0 0 0 Total Use 14,000 14,000 14,300 14,300 14,700 Ending Stocks 1,607 1,621 1,273 1,891 2,302 Total Distribution 15,684 15,697 15,647 16,245 17,056 Table 2. Sugar Cane Sugar Cane for Centrifugal C 2010/2011 2011/2012 2012/2013 hina Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan 2011 2012 2013 (1000 HA) (1000 MT) USDA O N USDA ew Post New Post USDA Official New Post fficial Official Area Planted 1,777 1,686 1,740 1,790 Area Harvested 1,777 1,686 1,740 1,790 Production 125,000 110,789 121,000 126,000 Total Supply 125,000 110,789 121,000 126,600 Utilization for Sugar 125,000 110,789 12,100 12,600 Utilizatn for Alcohol 0 Total Utilization 125,000 110,789 12,100 12,600 Table 3. Sugar Beets Sugar Beets C 2010/2011 2011/2012 2012/2013 hina Market Year Begin: Jan Market Year Begin: Jan Market Year Begin: Jan (1000 HA) (1000 MT) 2011 2012 2013 USDA Official New Post USDA Official New Post USDA Official New Post Area Planted 219 262 300 Area Harvested 219 262 300 Production 9,296 11,620 13,400 Total Supply 9,296 11,620 13,400 Utilization for Sugar 9,296 11,620 13,400 Utilizatn for Alcohol Total Distribution 9,296 11,620 13,400 Price Table Table 4. Wholesale Price of Grade 1 Granulated Sugar in Guangxi Province RMB per MT (USD $1.00=RMB 6.3) Month 2008 2009 2010 2011 2012 January 3,442 2,828 5,025 6,961 6,486 February 3,657 3,045 5,236 7,213 6,551 March 3,528 3,478 5,244 7,114 6,553 April 3,360 3,579 5,129 7,117 May 3,250 3,753 4,981 6,997 June 3,216 3,786 5,017 7,041 July 3,081 3,770 5,130 7,310 August 2,802 3,986 5,339 7,636 September 2,751 4,052 5,578 7,421 October 2,746 4,110 6,410 7,280 November 2,911 4,246 6,924 7,153 December 2,905 4,793 6,832 6,540 Yearly Average 3,137 3,786 5,025 Source: Guangxi Sugar Exchange Center and Guangxi Sugar Market Website: www.chinasugarmarket.com and http://www.gsmn.com.cn Trade Tables Table 5. China's Sugar Imports by Origin - MY 20010/2011 (MT) Country Oct-Dec Jan-Mar Apr-Jun Jul-Sept MY Total World 400,904 79,405 441,148 1,149,136 2,070,593 Brazil 312,940 1,143 138 838,586 1,152,807 Korea South 46,300 33,784 38,012 57,268 175,364 Thailand 1,394 7,575 139,707 110,242 258,918 Cuba 24,875 30,500 252,850 120,650 428,875 Australia 3,676 106 1,272 5,198 10,252 Philippines 0 0 0 16,800 16,800 Malaysia 1,519 0 1,927 206 3,652 India 52 1,040 520 0 1,612 Mauritius 152 110 111 13 386 China 0 66 0 0 66 New Zealand 682 264 0 0 946 Germany 24 1 30 24 79 Japan 48 17 29 4 98 United States 2 8 4 9 23 Others 9,240 4,791 6,548 136 20,715 Source: China Customs Table 6. China's Sugar Imports by Origin - MY 2011/2012 (MT) Country Oct-Dec Jan-Mar Apr-Jun Jul-Sept MY Total World 1,249,936 1,249,936 Brazil 1,150,466 1,150,466 Korea South 62,268 62,268 Thailand 17,343 17,343 Cuba 0 0 Australia 7,033 7,033 Philippines 6,000 6,000 Malaysia 5,716 5,716 India 590 590 Mauritius 324 324 China 66 66 New Zealand 60 60 Germany 24 24 Japan 17 17 United States 9 9 Others 20 20 Source: China Customs Table 7. China's Sugar Exports by Destination - MY 2010/2011 (MT) Country Oct-Dec Jan-Mar Apr-Jun Jul-Sept MY Total World 22,716 15,008 20,671 12,385 70,780 Hong Kong 7,748 7,703 8,406 7,367 31,224 United States 878 543 1,055 1,112 3,588 Mongolia 4,709 2,592 5,719 633 13,653 Malaysia 3,504 475 886 833 5,698 Canada 235 172 348 271 1,026 Singapore 2,516 225 252 312 3,305 Korea North 257 81 89 72 499 Macau 143 171 101 118 533 Japan 178 1,590 2,450 253 4,471 Syria 42 21 42 126 231 Somalia 0 84 42 462 588 Mexico 0 0 0 53 53 Australia 80 94 175 128 477 Others 2,426 1,257 1,106 645 5,434 Source: China Customs Table 8. China's Sugar Exports by Destination - MY 2011/2012 (MT) Country Oct-Dec Jan-Mar Apr-Jun Jul-Sept MY Total World 11,325 11,325 Hong Kong 6,954 6,954 United States 1,286 1,286 Mongolia 648 648 Malaysia 627 627 Canada 352 352 Singapore 234 234 Korea North 137 137 Macau 123 123 Japan 120 120 Syria 105 105 Somalia 84 84 Mexico 78 78 Australia 77 77 Others 500 500 Source: China Customs
Posted: 27 April 2012

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