Sugar Semi-annual

An Expert's View about Food , Beverages and Tobacco in China

Posted on: 13 Nov 2011

In MY 2011/12, total sugar production is forecast at 11.8 MMT (raw value), up five percent due to an increase in acreage. In MY 2010/11, total sugar production is estimated at 11.2 MMT (raw value), down two percent because of frost damage.

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: 10/13/2011 GAIN Report Number: CH11047 China - Peoples Republic of Sugar Semi-annual Semi-annual Approved By: Scott Sindelar Prepared By: Joshua Emmanuel Lagos and Jiang Junyang Report Highlights: In MY 2011/12, total sugar production is forecast at 11.8 MMT (raw value), up five percent due to an increase in acreage. In MY 2010/11, total sugar production is estimated at 11.2 MMT (raw value), down two percent because of frost damage. For MY 2011/12 sugar imports are forecast at 2.2 MMT (raw value), a 15 year record high on rising domestic consumption and consecutive years of low sugar production. Executive Summary: In MY 2011/12, total sugar production is forecast at 11.8 MMT (raw value), up five percent due to an increase in acreage. In MY 2010/11, total sugar production is estimated at 11.2 MMT (raw value), down two percent because of frost damage. For MY 2011/12 sugar imports are forecast at 2.2 MMT (raw value), a 15 year record high on rising domestic consumption and consecutive years of low sugar production. Centrifugal Sugar Production In MY 2011/12, total sugar production is forecast at 11.8 MMT (raw value), up five percent due to an increase in acreage. Cane sugar and beet sugar production is projected at 10.8 MMT and 1 MMT (raw value), rising 5 and 15 percent from the previous year. In MY 2010/11 total sugar production is estimated at 11.2 MMT (raw value), down 2 percent due to frost damage and low temperature. Sugar beet crushing begins in different months. For example, crushing commences in September for the northern province of Heilongjiang, while most of the other major provinces such as Xinjiang and Inner Mongolia start in early October. According to industry sources, sugar cane crushing season starts in late November. Sugar Cane For MY 2011/12, sugar cane area is forecast at 1.74 million hectares (ha), up three percent from last year. The yield is higher than last year, when yields were damaged by frost and low temperature. In MY 2011/12, low temperatures and drought in spring and summer have prevented the crop from maturing at a normal rate. That was alleviated by two typhoons in late September and early October which brought more than sufficient rainfall to major producing areas such as Guangxi, Guangdong, and Hainan. Because of this rainfall, industry sources expect the crop condition will improve before the crushing season starts in late November. Sugar cane accounts for 87 percent of China?s total sugar area (sugar cane and sugar beet). 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 the past, drought has caused the most damage to China?s sugar cane crop. Most sugar cane is planted on hills, and has limited to no irrigation facilities. According to the 12th five-year plan (2011-2015) on crop development by the Ministry of Agriculture (MoA), the central government plans to invest in water conservancy and irrigation facilities in key sugar cane producing regions (central and southern parts of Guangxi province, southwestern part of Yunnan, Leizhou peninsula of Guangdong province and northern part of Hainan province). Other 12th five-year goals include: stabilizing cane acreage, improving yields, and raising the sugar content. Sugar mills encourage farmers to plant sugar cane by raising prices (The industry price must be in tandem with the government sugar guidance price. See Gain Report CH11019 for more information). For instance, the cane price in MY 2010/11 rose by more than 20 percent from the previous year. However, despite high purchase prices, higher fuel, fertilizer, and labor costs have risen to record highs, and may be affecting farmer?s planting intentions, causing them switch to other more profitable crops such as fruits (bananas), vegetables, and cassava. For example, Guangxi province acreage rose by less than five percent in MY 2010/11. Because sugar cane farms are small, there is no mechanized planting or harvesting. Purchase Price of Sugar Cane in Major Producing Provinces RMB per MT (USD $1.00 = RMB 6.50) Guangxi Yunnan Guangdong Hainan MY 2008/09 275 231 245 268 MY 2009/10 350 280 400-410 270 MY 2010/11 482 350 540-550 450 MY 2011/12 is not available Industry Sources Sugar Beets For MY 2011/12, sugar beet area is forecast at 240,000 ha, up 10 percent from last year. In response to higher beet prices, farmers improved their on-farm management such as using plastic film to help retain soil moisture, as well as invest in more irrigation. Xinjiang, Heilongjiang, and Inner Mongolia comprise approximately 90 percent of China?s total sugar beet output. For beet production, the provincial government does not mandate a sugar beet guidance price. In MY 2010/11 and MY 2011/12 sugar mills raised their contracting price to encourage more acreage. For instance, in MY 2011/12, sugar mills in Xinjiang and Heilongjiang announced they planned to raise prices by 20 and 15 percent. In addition, some mills have begun offering a mechanized harvesting service for their contracted farms. Purchase Price of Sugar Beets in Major Producing Provinces RMB per MT (USD $1.00 = RMB 6.5) Xinjiang Heilongjiang Inner Mongolia MY 08/09 300-330 320-370 320-340 MY 09/10 280 320-370 320-360 MY 10/11 380 480 400 MY 11/12 420-490 550 480 Industry Sources Consumption MY 2011/12 sugar consumption is forecast at 14.3 MMT (raw value), up two percent from the previous year. However, due to rising domestic sugar prices, more food processors and beverage manufacturers are using starch sugar (including HFCS), which is relatively less expensive. Trade MY 2011/12 sugar imports are forecast at 2.2 MMT, a 15 year record high. Because of low sugar production in the last 2 years, sugar imports have maximized the in-quota TRQ. Imports are becoming necessary not only for meeting domestic consumption needs, but also for replenishing the state reserve, which is estimated to be at relatively low level, about one month of domestic use. The CY 2011 TRQ is 1.95 MMT, with an in-quota-tariff of 15 percent. The CY 2011 out-of-quota tariff rate is 50 percent. Since 2005, the quota and tariff rate have not changed. Stocks For MY 2011/12, ending stocks are forecast at 1.3 MMT (raw value), 300,000 tons lower than last year. The government is expected to import more sugar to replenish the state reserves. Some trade sources report that the government might issue additional quotas (without charging out-of-quota tariff rates) for state trading companies if the international market price is competitive. Many industry contacts agree that an adequate stock level for China should be around 3 MMT, or an equivalent of two month?s domestic use. 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). During MY 2010/11, the government auctioned 1.86 MMT of sugar from state reserves to mitigate price rises, while in MY 2009/10, it auctioned 1.71 MMT of sugar in its 8 monthly auctions. 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 05/31/2011 250,000 6,844 07/06/2011 250,000 7,357 08/05/2011 190,000 7730 08/23/2011 200,000 7,672 09/16/2011 200,000 7,050 Total to date 1,86000 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. In January-August 2011, the CSA reported that saccharine production reached 10,486 tons. During the same period, exports reached 7,955 tons, down 5.2 percent from the same period last year. Domestic sales reached 1,631 tons, up 7.7 percent. Starched-based Sweeteners In CY 2011 the CSA stated that starch sugar production will rise over 10 percent to 10 MMT. In CY 2010, total starch sugar production reached 9.23 MMT (starch sugar (in solid form) was 3.2 MMT and liquid starch sugar was 6.03 MMT), up 25% from the previous year. In the last few years, major starch sugar end-users, including the beverage, food processing, and pharmacy sector began substituting starch sugar because of high domestic sugar cane and beet prices. For instance, according to CSA?s estimate, starch sugar used by Coca and Pepsi accounts for 50% and 35 % of their total sugar use. Tables Production, Supply, and Demand (PSD) Tables Table 1. Centrifugal Sugar Sugar, Centrifugal China 2009/2010 2010/2011 2011/2012 Market Year Market Year Market Year Begin: Oct Begin: Oct Begin: Oct 2009 2010 2011 USDA USDA O New USDA New ffici O New ffici al Post Post Offici al al Post Beginning Stocks 3,784 3,784 2,355 2,355 1,514 1,607 (1000 MT) Beet Sugar Production 652 652 863 863 1,000 990 (1000 MT) Cane Sugar Production 10,77 10,77 10,44 10,33 11,00 10,85 (1000 7 7 0 6 0 0 MT) Total Sugar Production 11,42 11,42 11,30 11,19 12,00 11,84 (1000 9 9 3 9 0 0 MT) Raw Imports 1,342 1,342 1,600 1,850 1,600 1,950 (1000 MT) Refined Imp.(Raw Val) 193 193 220 280 250 250 (1000 MT) Total Imports 1,535 1,535 1,820 2,130 1,850 2,200 (1000 MT) Total Supply 16,74 16,74 15,47 15,68 15,36 15,64 (1000 8 8 8 4 4 7 MT) Raw Exports 4 4 4 5 4 4 (1000 MT) Refined Exp.(Raw Val) 89 89 60 72 60 70 (1000 MT) Total Exports 93 93 64 77 64 74 (1000 MT) Human Dom. 14,30 14,30 13,90 14,00 13,60 14,30 (1000 Consumption 0 0 0 0 0 0 MT) Other Disappearance 0 0 0 (1000 MT) Total Use 14,30 14,30 13,90 14,00 13,60 14,30 (1000 0 0 0 0 0 0 MT) Ending Stocks 2,355 2,355 1,514 1,607 1,700 1,273 (1000 MT) Total Distribution 16,74 16,74 15,47 15,68 15,36 15,64 (1000 8 8 8 4 4 7 MT) Table 2. Sugar Cane Sugar Cane for Centrifugal China 2009/2010 2010/2011 2011/2012 Market Year Market Year Market Year Begin: Oct Begin: Oct Begin: Oct 2009 2010 2011 Ne USDA USDA USDA w New O O New ffici fficial Pos al Post Offici al Post t Area Planted 1,709 1,697 1,777 1,686 1,740 (1000 HA) Area Harvested 1,709 1,697 1,777 1,686 1,740 (1000 HA) Production 115,5 115,58 125,0 110,7 116,0 (1000 87 7 00 89 00 MT) Total Supply 115,5 115,58 125,0 110,7 116,0 (1000 87 7 00 89 00 MT) Utilization for Sugar 115,5 115,58 125,0 110,7 116,0 (1000 87 7 00 89 00 MT) Utilizatn for Alcohol 0 0 (1000 MT) Total Utilization 115,5 115,58 125,0 110,7 116,0 (1000 87 7 00 89 00 MT) Table 3. Sugar Beets Sugar Beets 2009/2010 2010/2011 2011/2012 China Market Year Market Year Market Year Begin: Jan Begin: Jan Begin: Jan 2010 2011 2012 USDA Ne USDA Ne USDA Offici w Offici w O New ffici al Pos al Pos al Post t t Area Planted 186 219 240 (1000 HA) Area Harvested 186 219 240 (1000 HA) Production 7,17 9,29 10,300 (1000 9 6 MT) Total Supply 7,17 9,29 10,300 (1000 9 6 MT) Utilization for Sugar 7,17 9,29 10,300 (1000 9 6 MT) Utilizatn for Alcohol (1000 MT) Total Distribution 7,17 9,29 10,300 (1000 9 6 MT) Price Table Table 4. Wholesale Price of Grade 1 Granulated Sugar in Guangxi Province RMB per MT (USD $1.00=RMB 6.5) Month 2007 2008 2009 2010 2011 January 3,656 3,442 2,828 5,025 6,961 February 3,599 3,657 3,045 5,236 7,213 March 3,760 3,528 3,478 5,244 7,114 April 3,723 3,360 3,579 5,129 7,117 May 3,639 3,250 3,753 4,981 6,997 June 3,576 3,216 3,786 5,017 7,041 July 3,476 3,081 3,770 5,130 7,310 August 3,867 2,802 3,986 5,339 7,636 September 3,736 2,751 4,052 5,578 7,421 October 3,925 2,746 4,110 6,410 November 3,595 2,911 4,246 6,924 December 3,498 2,905 4,793 6,832 Yearly Average 3,671 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 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 79,405 441,148 921,457 Cuba 24,875 30,500 252,850 308,225 Thailand 1,394 7,575 139,707 148,676 Korea South 46,300 33,784 38,012 118,096 Myanmar 0 1,491 4,403 5,894 Malaysia 1,519 0 1,927 3,446 Australia 3,676 106 1,272 5,054 Vietnam 0 0 1,075 1,075 Colombia 2,080 2,288 1,040 5,408 India 52 1,040 520 1,612 Brazil 312,940 1,143 138 314,221 Mauritius 152 110 111 373 Germany 24 1 30 55 Japan 48 17 29 94 United Arab Emirates 75 0 17 92 Others 7,769 1,350 17 9,136 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 15,008 20,671 58,395 Hong Kong 7,748 7,703 8,406 23,857 Mongolia 4,709 2,592 5,719 13,020 Malaysia 3,504 475 886 4,865 Singapore 2,516 225 252 2,993 Kuwait 1,000 33 25 1,058 United States 878 543 1,055 2,476 Saudi Arabia 520 160 195 875 Yemen 271 604 206 1,081 Korea North 257 81 89 427 Canada 235 172 348 755 Egypt 192 96 16 304 Japan 178 1,590 2,450 4,218 Macau 143 171 101 415 Others 565 563 923 2,051
Posted: 13 November 2011

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