China to lose top rank in world sugar imports, after trade crackdowns

21.11.2017

China is to lose its longstanding position as the world’s top sugar importer, thanks to the success of a government clampdown on buy-ins, the US Department of Agriculture said – although the International Sugar Organization disagrees.

China is to import 4.20m tonnes of sugar in 2017-18, a drop of 400,000 tonnes year on year, and the weakest volume in five years, the US Department of Agriculture said.

The drop reflects tariff increases from 50% to 95%, China imposed this year on imports from major exporting countries including Brazil, Thailand and Australia, with the country also enacting a crackdown on illegal buy-ins.

Furthermore, the higher prices encouraged by the reduced import supply are seen boosting domestic production, with “expanded sugar beet and sugar cane area”, and so cutting the need for purchases.

China vs Indonesia

“China is yielding the top spot [in imports] following policy changes,” the USDA said.

“Higher domestic production and tighter government control over imports have resulted in China dropping from the largest to the second-largest sugar importer.”
 
Indonesia, seeing “growing imports from Brazil”, will now take over as the largest buyer of the sweetener, with volumes forecast at 4.55m tonnes for 2017-18.

That represents an upgrade of 400,000 tonnes from the previous forecast, in May, but down some 370,000 tonnes year on year nonetheless.

Output upgrades

The comments came as the USDA raised by 2.65m tonnes to 10.73m tonnes, raw value, its forecast for the world sugar production surplus in 2017-18.

While the forecast for global consumption was raised by nearly 2.7m tonnes to a record high of 174.2m tonnes, the world output estimate was 5.3m tonnes to 184.9m tonnes, with upgrades to figures for all three major producers, Brazil, India and the European Union.

The Indian output estimate was lifted by 1.9m tonnes to 27.7m tonnes, “due to higher area and yields in Maharashtra, Uttar Pradesh, and northern Karnataka”.

The EU received a 1.5m-tonne production upgrade to 20.1m tonnes, with the bloc’s export forecast lifted by 300,000 tonnes to 2.5m tonnes, up a “whopping” 60% year on year.

The forecast for Brazil’s output was lifted by 550,000 tonnes to a record 40.2m tonnes, with the USDA flagging “favourable weather, improved crop management”.

Price outlook

The USDA briefing represented the second upgrade within hours to forecasts for the world sugar surplus in 2017-18, with the International Sugar Organization separately lifting by 400,000 tonnes to 5.0m tonnes its forecast for overproduction.

The ISO estimates also factored in an upgrade to EU production expectations, of 500,000 tonnes to 19.1m tonnes, while the figure for Russian production was lifted by 200,000 tonnes to 6.3m tonnes, with some consumption downgrades too.

Against the backdrop of a 20017-18 surplus, the intergovernmental termed “unsurprising” a drop in New York prices from January levels above 20 cents to the 15.00 cents a pound at which spot March futures on Monday.

“With the second surplus season on the horizon, the imminent picture does not look too promising” for higher prices, the ISO added, undermining hopes for a boost to values from a switch by Brazilian mills to making more ethanol from cane, at the expense of sugar output.

“The ISO expects that even a further rise of the ethanol share in the production mix in Brazil may be only enough to reduce the world surplus in 2018-19 rather than bring the world sugar economy into a deficit phase before mid-2019.”

The ISO data are reported on a tel quel, ie “as it comes” basis, and on a strict October-to-September crop year, unlike the USDA data.


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