China’s coldest spell in 45 years hits sugar production

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Czapp Insight Focus
La Niña has brought Xinjiang’s coldest period for 45 years, hindering beet development. Many farmers have also turned to corn and potato as they pay more than cane and beet. China should therefore produce 10.3mmt of sugar in 2021/22, down 360kmt year-on-year.

China’s Sugar Production Isn’t Growing

We think China will produce 10.3m tonnes of sugar in 2021/22, down 360k tonnes year-on-year.

La Niña brought very cold weather to Northern China in early November, hindering beet development. Xinjiang, one of China’s key beet regions, endured its coldest period for 45 years, with COFCO reporting monetary losses of RMB 180-300 million due to the weather’s impact on its beet. COFCO was responsible for 57% of Xinjiang’s beet sugar production in 2020/21.

To make matter worse, a lot of farmers have turned to corn and potato, in search of greater returns.

China’s beet processors had produced just 643.4k tonnes of sugar by the end of November, down
254.3k tonnes year-on-year. We think China will produce 1.05m tonnes of beet sugar in total, down 480k tonnes year-on-year.

Can Cane Sugar Save the Day?
China’s mills had produced 116k tonnes of cane sugar by the end of November, down 46% year-on year.

The country’s cane harvest is still in its early stages, though, so there’s still time for things to pick up. It’s also been very warm in Guangxi, China’s main cane region, which bodes well for sucrose yields. We therefore think China will produce 9.25m tonnes of cane sugar in 2021/22, up 122k tonnes year-on-year

What Does This Mean for Chinese Sugar Imports?
China has relied on sugar imports for 20 of the past 22 seasons. 2021/22 should be no different, with production 5.4m tonnes lower than consumption.

We think China will need to import around 5m tonnes of raws and whites in 2021/22, down 1.33m
tonnes year-on-year. However, import margins could be negative across 2022 unless the domestic market strengthens.

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