China’s sugar production expected to remain stable in 2023/24


     Porto Alegre, October 24th, 2023 – The most recent data from USDA, bringing forward the November biannual report, shows a scenario of tighter sugar supply availability for China in the 2023/24 crop, which began in October. The big highlight is the decrease in imports of around 400 thousand tons when comparing the data released in October with those from the USDA’s last biannual report in May, where imported volumes were expected to go from 5.0 to 4.6 mln tons. Despite the negative revision of 400 thousand tons in the last crop’s imports, there is even an increase of 800 thousand tons in Chinese external demand for sugar, with volumes changing from 3.8 to 4.6 mln tons.

Therefore, the market has two interpretations of Chinese imports in the new crop. On the one hand, there is an annual increase of 800 thousand tons, but, on the other, a decline in the increase that was previously estimated at 400 thousand tons, as imports from China in 2023/24, instead of 5.0 mln tons (expected in May 2023), will now hit 4.6 mln tons (the latest data from October 2023). USDA points out that this decline in imports from China must stem from the escalation in international prices seen since the end of March this year, when prices in New York dropped from the average of 19.00 cents to the current levels of 27.00 cents.

USDA also points out that sugar prices in China’s domestic market are fluctuating at the highest level since 2012. As domestic production remained unchanged at 10.0 mln tons between the May and October estimates, much of the downward pressure fell on ending stocks. However, SAFRAS & Mercado warns that, despite the stability against the estimates from May this year, USDA shows a growth of 1.04 mln tons in sugar production over the last crop, which was 8.96 mln tons. Thus, we also have a very divergent scenario from the last season and the first estimates for this season.

On the one hand, we have an increase in supply of 1.04 mln tons for the year, but, on the other, we have stability against the first estimate of the new crop. This is the same that happened with imports, which increased by 800 thousand tons during the year but, when compared to the first figures of the season,  fell by 400 thousand tons. Regarding ending stocks, the numbers seem to be more aligned. USDA estimated a decline of 1.08 mln tons in ending stocks for this crop compared to the previous season (decreasing them from 2.09 to 1.00 mln tons). Against the first data from May this year, the adjustment is also negative, albeit on a smaller scale, by 854 thousand tons compared to the volume of 1.82 mln tons seen in the May data.

At this point, USDA points out that China should start selling its strategic stocks in a movement that has not happened since 2016. Yet, SAFRAS & Mercado remembers that physical deliveries for the October/23 contract in New York, which were record-breaking at 3.0 mln tons, turned out to be sent to China. In other words, since the previous month, 65% of China’s import market has already been negotiated via physical deliveries for October/23, with 3.0 mln tons already purchased compared to the outlook for imports of 4.6 mln tons, with 1.6 mln remaining to be bought in the coming few months.

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