Forecast of China's Sugar Market (Xu Xue, Research Center for

Forecast of China’s Sugar Market

Xue Xu 徐 雪

Research Center for Rural Economy [email protected]

7 June, 2013

2013 World Agricultural Outlook Conference

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013/6/9 2

1. China’s sugar production and consumption

2. World ‘s sugar market

3. China’s sugar price - Why is it falling below production cost?

4. Forecast and conclusion

Key Messages

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

1. China’s sugar production and consumption

• The 4th largest sugar production country after Brazil, India and EU27.

• The 3rd largest sugar consumption country after India and EU27.

2013/6/9 3

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013/6/9 4

Sugar output: 13.3 million tons Consumption: 13.5 million tons

2012/2013 Crushing Season:

China’s Sugar Production and Demand

Unit: 10 thousand tons

Basic balance in

production and demand

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

World Sugar Market

2013/6/9 5

Source: USDA, FAS, PSD online, 12/21/2012

Beginning Stocks

Total Sugar Production

Total Imports

Total Supply

Total Exports

Total Use

Output exceed

Consumption Ending Stocks

2008/09 43,389 143,888 43,802 231,079 46,689 153,857 -9,969 30,533

2009/10 30,533 153,517 50,446 234,496 50,620 154,871 -1,354 29,005

2010/11 29,005 161,762 50,399 241,166 55,585 155,513 6,249 30,068

2011/12 30,068 172,148 50,266 252,482 56,140 160,134 12,014 36,208

2012/13 36,208 172,310 48,538 257,056 55,144 163,614 8,696 38,298

Unit: 1,000 metric tons, raw value

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Price of Sugar #11 of ICE

2013/6/9 6

Unit: cent/pound

17.2 cent/pound

RMB 2400 Yuan/ton

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Domestic sugar price

2013/6/9 7

Unit: RMB Yuan/ton

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Why China’s sugar price is constantly falling?

2013/6/9 8

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Domestic and world sugar price Unit: RMB Yuan/ton

2013/6/9 9

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

China’s Domestic sugar output and net import Unit: million tons

2013/6/9 10

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

5-6 million tons of state inventory

2013/6/9 11

Serious over-supply

Decline of sugar price

China’s Sugar Import

2011/2012: 4.26 million tons 2012/2013: 2.5-3 million tons

Ideal inventory:

3.38 million tons

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Why China is buying so much world sugar?

World sugar price is much lower than that of China

2013/6/9 12

China’s low protection level.

China’s sugar producing cost

is among the highest in the

world.

China: 5800 Yuan/ton

Brazil: 2500 Yuan/ton

15% tariff within import

quota(1.945 million tons);

50% tariff beyond quota

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Outlook and conclusion

2013/2014 Domestic market:

2013/6/9 13

Stable production

Low Price

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013/2014 Global Market:

Output: 177.015 million tons; Consumption: 172.424 million tons Sugar production will be 4.591 million tons more than consumption. Although the production will be decreased, the surplus will continue increase the world sugar stock.

2013/6/9 14

World sugar price : 16-20 cent/pound

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Long term projection to 2020

• Global sugar consumption : 201 million tons;

• China’s sugar consumption: 22.1 million tons;

Gap in production and consumption: 5 million tons

2013/6/9 15

China’s sugar imports will continue to increase

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Policy options:

• Encourage the transfer of sugar crop field, and develop appropriately scaled operations; provide socialized services during the process of seeding, plowing, transporting, selling, to reduce costs and enhance efficiency.

2013/6/9 16

• Provide more support to sugar crop farmers to stabilize the interest of farmers, and increase the security of sugar industry.

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

Thank You !

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC

2013WAOC