China’s sugar imports will next season ease to a three-year low as expected price gains encourage the world’s top buyer to rely more on stocks to bolster its supplies, shrinking inventories to a 12-year low.
China will in 2022-23, as starts in October, import 4.40m tonnes, a drop of 100,000 tonnes year on year, and well below the record 6.34m tonnes purchased last season, the US Department of Agriculture’s Beijing bureau said.
The decline in part reflects expectations of some recovery in domestic production from this season’s five-year low, encouraged by industry and state incentives, and assuming more “normal” weather.
However, the bureau flagged too the appeal to China of relying on domestic inventories in the face of international prices which, while below recent peaks, remain amongst their highest of the last five years.
New York raw sugar futures, the world benchmark, stood at 18.76 cents a pound on Thursday for the spot July lot, more than twice the levels hit during the slump two years ago.
‘Prices will rise’
“Industry insiders are bullish on 2022-23 sugar prices, forecasting that world sugar prices will rise because high demand will continue,” the bureau said.
“With world sugar prices forecast up, China may source from its stocks.”
“Industry sources predict stock levels will continue trending downward as the government will draw from stocks as the world sugar price remains high.”
China’s own values have also risen, topping $950 per tonne last month, up by more than $100 per tonne year on year.
The stocks drawdown will leave inventories at the close of next season at 2.35m tonnes, down by nearly 40% year on year.
That would be the smallest stockpile since 2010-11 – when China’s stocks dwindled to 1.62m tonnes, even as international prices hit 30-year highs.
The bureau forecast that China’s beet sugar output would recover by 100,000 tonnes to 1.0m tonnes in 2022-23, despite the increased competition from corn for land, for which rental costs have soared in northern China.
“For example, land rent in Inner Mongolia has grown from $923 per hectare in 2020-21 to as much as $2,308-2,769 per hectare in 2021-22”.
However, “beet sugar mills there are offering farmers increased support,” in the form of seed, machinery and consultancy support, “to keep farmers from switching to corn, and sugar mills running near capacity”.
Pavements vs plantations
Cane sugar production will expand by 300,000 tonnes to 9.0m tonnes, backed by state support in the top two growing provinces of Guangxi and Yunnan, in the face of “scarce labour, limited mechanisation, and growing competition from other crops”.
The bureau noted that in the southern cane-growing areas, “the available labour pool is limited because the younger generation prefers to move to urban centres in search of work”, yet hilly terrains curtail the potential for mechanisation.
In Guangxi, responsible for 70% of China’s cane sugar output, farm labour costs “are about $27 per tonne, or about one-third the price the farmer receives when cane is sold to the mills”.
Furthermore, “growing other crops, especially other fruits including citrus and dragon fruit is becoming increasingly attractive with growing consumer demand”.