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Shcri.com: China's Sugar Price will See an Increase in 2009

www.shcri.com -- During the 07/08 grinding season, the world’s sugar output reached 170 million tons and the sales amounted to 163 million tons. Countries or regions whose sugar outputs ranked top five were Brazil, India, EU, China and USA. The sum of these regions’ outputs made up 65 percent of the world’s total outputs. Countries or regions whose sugar consumptions ranked top five were India, EU, China, Brazil and USA. The sum of these regions’ consumptions made up 65 percent of the world’s total consumptions.

 

 

During the 08/09 grinding season, the world’s sugar supply can not meet the demand and there will be a gap of 4.9 million tons in the next grinding season. The major factor which causes the undersupply is the slump of India’s sugar output. It is recently predicted by ISMA that India’s sugar output in the 08/09 grinding season will drop by 44 percent to 14.8 million tons from 26.3 million tons in the 07/08 grinding season. The world’s sugar consumption will remain a slight increment. But the ratio of ending inventory in 08/09 will be lower than that of 07/08 and there will be another declining cycle from the ratio of 01/02 grinding season.

 

The major sugar production regions are Guangxi, Yunnan, Guangdong, Hainan, Heilongjiang, Xinjiang, Inner Mongolia, etc. The sugar output of Guangxi makes up about 60 percent of the total output in China.

 

China’s sugar industry begins to show an uptrend in 2009. The supply and demand of China’s sugar tends to be balanced. According to the data of April, the sugar output of 08/09 grinding season will decrease by 2.5 million tons. Roughly calculating the outputs of various sugar-contained industries in the first three months in 2009, it is predicted that China’s sugar sales of 08/09 grinding season will remain the same with that of 07/08 grinding season. Due to the declining planting areas of sugar cane and the influence of drought, sugar supply of 09/10 grinding season will be less than its demand. The sugar price will as well go up and perhaps hit the highest record of RMB 4,000/ton(584 USD /ton) in 2009.

 

The sugar consumptions in China are for industry and household, which make up respectively 70 percent and 30 percent of the total consumptions. The average growth rate of sugar consumption has remained about 5 percent these 10 years. The amount for household is firm while the amount for industrial use is more elastic. From January to March in 2009, all sectors except biscuit showed a positive growth, but the total output of food which contains sugar increased year on year. According to the rough data of output of various sugar-contained food, it is predicted that China’s sugar sales of 08/09 grinding season will basically remain the same with that of 07/08 grinding season.

 

 

Since early 2009, China’s sugar price has stayed high because of the declining output of sugar and decreasing purchase price of sugar cane. For example, the sugar price on spot market in Guangxi remains about RMB 3,750/ton(547 USD/ton).

 

Based on the tight balance of China’s sugar supply and demand of 08/09 grinding season, the sugar supply of 09/10 grinding season will be less than the demand. Major reasons are: first, as the Chinese government lifts the purchase price of crop, the benefit of sugar cane decreases, as well as its planting areas; Second, drought in early 2009 has affected the planting of sugar cane; Third, the output of sugar is still decreasing but the sugar consumption will continue to increase slightly in future.

 

Source: China Research and Intelligence

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Eileen Gu

shcri.com

T:86-21-5842-6733

Email:eileen@shcri.com