BEIJING - Analysts predict Chinese sugar production could drop by almost a fifth in 2014/15, with recent output data from the country's top growing region plunging from the year before.
Production in the province of Guangxi, accounting for about two thirds of the country's sugar output, had reached about 4.9 million tonnes by the end of February in the crop year that began in October, trade website Guangxi Sugar Network said this month.
That is down around 20 percent from the same period the year before, with analysts blaming the drop on adverse weather and reduced planting as the local government cut the amount mills must pay farmers for sugarcane.
Sharply lower output would buoy domestic prices that have climbed about 15 percent since the start of the year, although they fell last week as international prices hit a six-year low.
The latest figures for Guangxi suggest the decrease in the province's production over the whole of the marketing year will be steeper than earlier forecasts of a 16-percent decline to 7.2 million tonnes. The crushing season ends in about a month and production after that is typically tiny.
ADVERTISEMENT
That has prompted analysts to reduce their outlook for nationwide output to around 11 million tonnes from the 12 million many expected previously. Production the year before stood at 13.3 million tonnes.
"We have reduced our forecast again to 10.8 million tonnes," said Zhan Xiao, analyst at Xinhu Futures.
Guangxi cut the price mills must pay for cane by 10 percent this season, likely reducing farmers' willingness to fertilize, impacting yield, said Zhan.
Typhoons also damaged some of the region's crop, reducing cane supplies and leading several mills to halt crushing early.
"The local industry suggests an early finish of the season is likely across three major cane areas - Guangxi, Guangdong and Hainan - due to a decline in cane tonnage," Green Pool Commodities said in a note last week.
The firm estimates Chinese output at 11.1 million tonnes, down from its earlier forecast of 11.5 million.
But a trade source said tightened restrictions on imports would likely be a bigger factor than dwindling production in supporting local prices.
"Domestic sugar is already in deficit even with a good crop. Changes to the import regime would have more impact on prices than the crop," he said.
ADVERTISEMENT
Chinese consumption is expected to surpass 15 million tonnes in the 2015 calendar year, according to an official forecast.
