Report Highlights: 

MY 2014/15 centrifugal sugar production is forecast at 13.7 million tons, down 5 percent from the previous year due to falling domestic prices. MY 2013/14 production is revised down 3 percent from the previous estimate following weather-related damage. MY2014/15 imports are forecast at 3 million tons, down by 500,000 tons from the previous year, as lower domestic sugar prices reduce the price advantage of imports. Sugar consumption is forecast to grow 7 percent in MY 2014/15 to 17.3 million tons as lower sugar prices increase industrial consumption at the expense of starch-based sugar.

Executive Summary:

MY 2014/15 total centrifugal sugar production is forecast at 13.7 million tons (raw value), down 5 percent from the previous year, as farmers reduce sugar cane acreage in response to lower prices and higher production costs. MY 2014/15 imports are forecast down 500,000 tons from last year to 3 million tons, as the removal of the government reserve purchase program has lowered domestic prices and made importing sugar out-of-quota less profitable. As a result, ending stocks for MY2014/15 are forecast at 7.8 million tons, a drop of 635,000 tons from the previous year. Estimated MY 2013/14 centrifugal sugar production is cut 3 percent to 14.3 million tons due to frost damage to sugar cane in the south and extensive flood damage to sugar beets in Heilongjiang. Domestic sugar prices continued to fall in MY2013/14 as a result of relatively high stocks and imports. 


Centrifugal Sugar Production 

Total sugar production in MY 2014/15 is forecast at 13.7 million tons (raw value), down 5 percent from the previous year, on lower planting intentions for sugarcane. Total MY2013/14 sugar production is estimated at 14.3 million tons, down 3 percent from the previous USDA estimate, as weather-related damage reduced yields for sugar cane in Guangxi and Yunnan and sugar beets in Heilongjiang. 

Sugar Cane 

MY 2014/15 cane production is forecast at 120 million tons, down 5 percent from the previous year, on declining acreage as lower profits for cane farmers in MY 2013/14 negatively influence planting decisions. 

Estimated MY 2013/14 sugar cane production is lowered 2 percent to 126 million tons due to frost damage to sugar cane in Guangxi and Yunnan provinces in November, December and February which lowered yields. According to industry contacts, as of March 2014, average sugar extraction rates in Guangxi and Yunnan provinces were 12.07% and 11.41% respectively, around 0.4 percentage points lower than normal. 

The government decision in MY2013/14 to eliminate a reserve purchase program which had supported sugar prices caused cane prices to drop 15 percent to RMB 4,801 a ton and sugar beet prices to fall 11 percent to RMB 5,244 a ton from the same period last year. The government adopted this new policy in an attempt to correct large sugar stocks which resulted from expanded production and significant imports in response to its policy which kept domestic sugar prices above the world price. 

Sugar mills responded to lower sugar prices and falling profits in MY2013/14 by cutting cane prices to farmers 7 percent to RMB 440 per ton and reportedly some sugar mills have even delayed payments to farmers. Given the financial constraints, it is unlikely that mills will increase sugarcane prices in MY 2014/15 which will further impact production expectations.

Due to these financial considerations, cane farmers in major production areas, such as Guangxi, Guangdong and Hainan are instead planting more profitable crops. For example, in Guangxi, the largest cane producing province, cane acreage is forecast to drop 6 percent in MY 2014/15 as farmer’s substitute low-labor, fast-growing tree species for industrial use, according to the provincial sugar industry bureau. Once transferred to forestry use, however, it is difficult to reclaim the land for sugar cane and the acreage loss may be permanent. Cane acreage loss in Hainan is estimated to reach 11 percent in MY 2014/15 as low profits also fuel farmer’s trend toward alternative crops, such as rice, melons and vegetables, according to provincial statistics. 

In addition to low prices, high labor costs have also factored into declining sugar cane production forecasts. More than half of sugar cane acreage is in hilly areas for which mechanized machinery is unsuitable and necessitates the use of hand labor for planting and harvesting. As the cost of labor continues to rise, averaging RMB 120 per ton in MY 2013/14, or 27 percent of the price of cane, farmer’s profits from sugar cane will be impacted. According to a field survey, lower prices and rising labor costs caused a 9 percent drop in net income for cane farmers in MY 2013/14.

Sugar Beets 

MY 2014/15 beet production is forecast at 10.7 million tons, up 19 percent as yields recover from extensive flood damage in MY 2013/14. MY2014/15 sugar beet area is forecast unchanged at 210,000 Ha as sugar beet profit remains comparable to competing crops in Xinjiang, the largest producing province, despite a 2 percent drop in beet prices in MY 2013/14. 

MY 2013/14 sugar beet production is estimated at 9 million tons, down 1.5 million tons from the previous estimate. Sugar mills increased MY 2013/14 beet prices in Inner Mongolia, the second largest producing province, to keep beet acreage stable. However, a devastating flood in Heilongjiang, the third largest sugar beet production area, resulted in an overall acreage loss. Industry estimates that 80 percent of beet acreage in northwest Heilongjiang was destroyed by flooding in August 2013. As a result of sugar beet shortages, only 5 sugar mills operated in Heilongjiang in MY2013/14, down from 10 mills the previous year.


Sugar consumption is forecast to grow 7 percent in MY 2014/15 to 17.3 million tons due its lower price. A 15 percent drop in the price of sugar in MY 2013/14 compared to a 5 percent drop in starch sugar, as corn prices are supported by government procurement programs, drew consumption away from starch sugar in the beverage and food processing sectors. Thus, estimated MY 2013/14 sugar consumption is raised one percent to 16.2 million tons due to sugar’s favorable prices.

Marketing Efforts by China Sugar Association 

According to the China Sugar Association, sugar mills had sold 4.78 million tons of sugar through March 2014, equaling 39 percent of domestic production; sales exceeded 50 percent of production during the same period last year. The slower sales rate indicates that sugar mills are holding product due to low market prices in anticipation of better conditions. To improve the options for sugar mills, CSA is lobbying the government to take measures to support the domestic sugar industry, including a temporary sugar reserve program, restrictions on sugar imports and artificial sweeteners, and a crackdown on smuggling. CSA is also advocating for a target price program for sugar cane in MY14/15. 


MY2014/15 sugar imports are forecast at 3.0 million tons (raw value), 500,000 tons lower than the previous year, as the removal of the government reserve purchase program has lowered domestic prices and made importing sugar out-of-quota less profitable. 

MY 2013/14 sugar imports are estimated at 3.5 million tons, 700,000 tons higher than the previous estimate as imported sugar remains price competitive over domestic sugar. Sugar imports in recent market years have greatly exceeded the 1.95 million ton annual tariff rate quota (TRQ), as artificially high domestic prices made imports price competitive even with an out-of-quota tariff rate of 50 percent. 

By the end of February, sugar imports in MY2013/14 totaled 2.1 million tons according to customs data. However, trade contacts report that recent increases in the price of Brazilian sugar have made it unprofitable to import out of quota sugar since March 2014. Imports are expected to continue at a slower pace through the rest of MY 2013/14 as in-quota imports only face a 15 percent tariff.

In response to China’s sugar mill industry concerns that imports threaten the viability of domestic mills, customs authorities have strengthened enforcement against smuggled agricultural commodities, including sugar. In addition, sugar mills continue to lobby for higher out-of-quota tariff rates to protect the domestic industry. However, the government is unlikely to raise rates given its WTO commitments. 

By contrast, the sugar refinery industry is expected to continue to profit from its ability to access lower priced imports and to expand in coastal provinces. CSA is urging refiners to limit imports in consideration of domestic farmers and mills. However, industry contacts expect this initiative to have limited results. 


MY2014/15 ending stocks are forecast at 7.8 million tons (raw value), 635,000 tons lower than the previous year due to lower production and imports and rising consumption. MY2013/14 ending stocks are estimated at 8.4 million tons, unchanged from the previous estimate. The government is unlikely to make large quantities of sugar available from its reserves in MY 2014/15 to avoid driving down prices. 

Other Sweeteners 

Government policy restricts the development of the saccharine industry in China to protect the domestic sugar market and to address environmental, food safety and consumer health concerns. The government controls the sector by restricting production and domestic sales, conducting an annual review on production plans, and standardizing its usage as an additive in food. Only four plants are licensed for saccharine production in China. These plants are monitored and inspected by CSA to ensure compliance with production guidelines and limits. The saccharine production quota for 2013 was set at 19,000 tons, the same as last year, with 3,200 tons designated for domestic sale and 15,800 tons for export. Based on CSA inspections, actual CY2013 domestic sales and exports totaled 3,197 tons and 14,950 tons, respectively. 

Starched-based Sweeteners 

Industry sources estimate CY 2013 total starch sugar production at 12.6 million tons, down 5 percent from the previous year due to falling demand as beverage and food processing user’s substitute to lower priced sugar. This trend is expected to continue, with CY 2014 starch sugar production forecast down another 5 percent to 12 million tons