Porto Alegre, November 25th, 2024 – The most recent USDA data regarding the biannual report on international sugar supply and demand have not yet been officially published by the secretariat, but local USDA attachés have anticipated some data from specific countries, such as China, before the official publication of the report on November 21. It is in this context that SAFRAS & Mercado analyzes the data on China with a clear emphasis on the increase in production. USDA currently estimates sugar production for China at 11.00 mln tons for the current 2024/25 crop, the highest value in 11 years.
Firstly, this volume represents an increase of 10.44% (or 1.04 mln tons) over the production of the previous 2023/24 crop, which was 9.96 mln tons. The detail is that the data for the previous crop were also revised by USDA, going from 9.90 to 9.96 mln tons, which marginally neutralized part of the advances in the annual comparison.
What is shown behind this strong production advance is the significant increase in the supply of cane and beet. In the new season, cane supply is expected to grow by 250,000 tons (+2.70%), with the current crop reaching 9.5 mln tons in China, while the beet crop is expected to grow by 350,000 tons (+30.43%), with the supply volume reaching 1.5 mln tons. It is interesting to note that this supply growth of cane and beet was favored by the climate, which proved to be important during the plant development periods.
This happened despite the occurrence of a hurricane in southern China, which ended up not impacting significant areas of cane and beet, allowing supply to increase. Another factor that determined the increase in cane supply was the increase in purchase prices determined by the Chinese government, which encouraged production growth. Just to give an idea, cane producers in China have a profit margin of USD 100 per ton, which is very significant by local standards.
On the beet side, the supply growth could have been even greater if many producers had not opted to change the crop, switching to corn, soybeans, and potatoes, given the low profitability levels that beet for sugar production has received. In addition, some key regions for beet production in China have had excessive rainfall and below-average temperatures, which have also affected the amount of beet supply. In this sense, it has become clearer that the Chinese government has chosen to encourage the supply of sugar cane more than that of beet to increase sugar production in the country.
Another important detail is the issue of stocks in China, which has been significantly low since the previous crop, which led the Chinese government to determine the incentive to increase sugar supply in the country, culminating in the highest levels of production growth in 14 years. In May this year, USDA indicated final stocks for China in the current 2024/25 crop at only 271 thousand tons, the lowest level available in the historical series. However, the November report will show final stocks at 1.573 mln tons, still only 130 thousand tons (+13.74%) higher than the final stocks of 1.383 mln tons of the 2023/24 crop. When looking at the period between the 2014/15 and 2021/22 seasons, we can see that China’s final sugar stocks usually ranged from 10 to 5 mln tons. Between the 2022/23 and 2023/24 crops, these stocks began to range from 1.3 to 2.0 mln tons. With this, the current stocks of the 2024/25 crop, at 1.53 mln tons, already show an important recovery pattern, at least compared to the last two years.
Another important detail is the domestic demand, which continues with the inelastic growth pattern that the commodity has, as between the current November report and the previous one, in May, there will be a drop of only 100 thousand tons (-0.64%), with consumption slightly falling from 15.7 to 15.6 mln tons. Compared to the 2023/24 crop, consumption remained at 15.6 mln tons. Imports, on the other hand, will remain firm at 5.0 mln tons, in line with what USDA estimated in the May report and also in line with the year-ago comparative period.