China’s Sugar Output to Fall 13% This Year on Weather, Yields
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By William Bi

Feb. 19 (Bloomberg) — Sugar output in China, the world’s third-largest producer, may fall 13 percent this year, said the head of an industry group, as cold weather and lower fertilizer use cuts yields.

Production will decline by 2 million metric tons to 12.84 million tons from a record 14.84 million tons last year, Jia Zhiren, chairman of the China Sugar Association, forecast today at a conference in Nanning.

Prices in China have gained 24 percent this year on expectations of lower output and as the government began purchasing sugar in an effort to mop up a surplus caused by over-planting.

“Output will fall significantly,” Jia said. “In a year when output drops, it often drops more” than expectations, he said. The output decline compares with the 13.04 million ton median estimate of five analysts surveyed by Bloomberg News earlier this week.

Freezing temperatures and reduced fertilizer use may cut output in Guangxi province, China’s top producer of the sweetener, by 19 percent this year, a regional industry executive said today.

Output may plunge to 7.6 million tons in the region’s crushing season, compared with 9.4 million tons last year, Nong Guang, chairman of the Guangxi Sugar Association, told the conference in Nanning today.

“If it’s really 7.6 million tons, that’s a serious reduction,” Jocelyn Yang, analyst at Dahua Futures Co., said in an interview. Still, “the market may not buy that” Guangxi’s output would drop that much, Yang said.

Rising Stocks

A fall in output comes after gains in recent years, which have outpaced demand growth, leading to a build-up in stockpiles of more than 3 million tons, said Chen Jingqun, an analyst at Guangxi Sugar Net.

“Before growth was just taken for granted, but now there’s a slowdown in economic growth,” said the sugar association’s Jia.

As of Feb. 10, sugar sales in Guangxi have fallen 12 percent from last year to 1.8 million tons, said Nong.

The worsening recession has reduced the amount of sugar used by the food-processing industry for exports and domestic consumption, said Zhao Lihua, a director at the National Development and Reform Commission. China won’t import much sweetener this year because of higher global prices, Zhao said.

China will allow domestic prices of sugar to gain further to boost incomes for farmers and the cane industry, said Jiao Nianmin, vice president of Nanhua Sugar Group Co., in an interview today.

‘Reasonable Incomes’

“The government wants reasonable incomes for farmers and crushers, so it won’t let prices fall,” said Jiao. “But it doesn’t want the gains to be too drastic.”

It is “unreasonable” for prices to fall below 3,500 yuan ($512) a ton, said Yang Daoxi, vice governor of Guangxi province.

White sugar for September delivery on the Zhengzhou Commodity Exchange fell 0.8 percent to 3,544 yuan a ton today. Cash prices in Guangxi are about 3,200 yuan to 3,300 yuan, the break-even point for the average crusher, Yang said.

“The government will sell reserves if deemed necessary,” said Jiao, who is also vice chairman of the China Sugar Association. A rise to 4,000 yuan a ton may trigger a reserve sale, said Dahua Futures’ Yang.

China meets the bulk of its needs domestically and imports around 400,000 tons of raw sugar every year from Cuba under a decades-old trade agreement.

To contact the reporter on this story: William Bi in Nanning at wbi@bloomberg.net