CCM: Sucrose price: fluctuations both in China and abroad 10-13-2016

Summary: Since late April 2015, the sucrose prices in China and abroad have undergone fluctuations. In the future, the domestic demand, weather conditions and the USD currency trend will play roles in impacting the prices at home and abroad.


The Chinese version is written by Zhang Zihai from Avic Futures Co., Ltd.


Source: Internet


The USD/INR exchange rate in this article, USD1.00=INR63.5376 is sourced from Exchange-Rates.org on 22 May, 2015, as the People's Bank of China has no such references.

 


Since late April, 2015, the sucrose prices both in China and abroad have undergone fluctuations.

China: The futures price of white sugar from Zhengzhou Commodity Exchange fluctuated from USD912/t (RMB5,580/t) to USD932/t (RMB5,700/t).

 

International market: The futures price of raw sugar from the Intercontinental Exchange ranged from USD271/t to USD300/t.


The following reasons are for the sucrose price fluctuations in China and in the international market since late April 2015.


China
- Continuously decreasing output. In the 2014/15 extracting season (during October 2014-September 2015), the accumulative output of sucrose reached 10.31 million tonnes by the end of April, a YoY decline of 22%. Of this, Guangxi Zhuang Autonomous Region produced 6.32 million tonnes in total, down by 26% YoY. The China Sugar Association (CAS) expected a YoY fall of 2.8 million tonnes in 2014/15 output, from 13.3 million tonnes to around 10.5 million tonnes.


- Increased consumption. Statistics from CAS has it that by the end of April, the sales rate of sucrose has increased by 7.9 percentage points YoY to 52.9%, so the volume accumulated to about 5.5 million tonnes.


- Largely raised imported sugar. According to statistics released by CAS on 22 April, the import volume of raw sugar was 490.6 tonnes in March, a sharp MoM growth of 295.9%. This can be attributed to the constantly dilated price gap between China and the international market. Induced by the significant profit increases, the domestic enterprises imported a large amount of raw sugar, including smuggled one, which lashed the local sucrose industry. In May, the profit from processing imported raw sugar has arrived at USD343/t (RMB2,100/t), up by 8% MoM.




International market
- Brazil
In April, it only exported 886,200 tonnes of sucrose, down by 31.4% YoY. Of this:

 

Raw sugar: 623,500 tonnes, down by 27.1%

Granulated sugar: 262,700 tonnes, down by 39.8%


The Indian government has issued the export subsidy policy for its own sugar industry, which has had negative impact on the exports from Brazil. Now the Brazilian enterprises are collecting data to apply for an international trade investigation against the subsidy policies issued by India and Thailand.


In February, the Indian government decided to give a subsidy of USD63/t (INR4,000/t) to the sugar plants for their exports of raw sugar. On 12 May, Maharashtra, the largest edible sugar production state in India (37% of the total output) approved the subsidy to increase by USD16/t (INR1,000/t) to USD79/t (INR5,000/t) for the local sugar plants.


- India
By 15 May, the output of sucrose in the 2014/15 extracting season has risen by 16% YoY to 27.8 million tonnes. According to the Indian Sugar Manufacturer Association, the payment for sugarcane in arrears by sugar plants reached USD3 billion (INR210 billion), due to the low sucrose price and the subsequently tightened capital flows.


In the future, the sucrose price in China and abroad will be influenced by:

 

Demand. The demand will be increased in the coming summer, a peak period for sucrose in China, which is beneficial to the price rise.

 

El Nina Phenomenon. On 14 May, the National Weather Service of the United States predicted that the occurrence rate of this phenomenon is 90% in northern hemisphere in 2015 summer. This will bring wetter weather to the central/ southern Brazil (major sucrose production regions) and draw back the sucrose yield.

 

USD. It is expected that the USD will rally, pulling down other currencies such as the BRL. This will be favorable for the sucrose exports, but unfavorable for the global sucrose prices.


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


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