According to the monitoring of SunSirs, the average price of first grade white sugar at the beginning of the year was 5,786 RMB/ton, and at the end of the year, the average price of first grade white sugar was 6,704 RMB/ton, with a price increase of 15.87% compared to the same period last year. The highest price of white sugar this year was 7,538 RMB/ton, and the lowest price this year was 5,754 RMB/ton.

In 2023, the price of white sugar rose first and then fell throughout the year, and began to decline in mid September. According to the monthly rise and fall chart for 2023, it can be seen that the largest increase of the year was in April, with a growth rate of 9.01%. The largest decline of the year was in December, with a decline of 6.37%.

Phase 1: The main reason for the significant increase in white sugar during the strong upward phase (January May) is: 1. The large area of arid areas caused by low rainfall in the main domestic production areas, resulting in a decrease of about 590,000 tons in domestic white sugar production. 2. In terms of foreign supply, production in Brazil has not yet begun. The expected increase in sugar production in India has shifted to a decrease in production, coupled with the adjustment of the Indian government's sugar export policy, directly driving up international sugar prices. 3. The import volume has sharply decreased. From January to May 2023, the cumulative import of sugar was 1.0569 million tons, a year-on-year decrease of 566,600 tons.

Phase 2: High level fluctuation (June July): 1. The import loss situation remains, leading to a sustained low import volume. 2. The market sugar price is high, and downstream terminal demand is lower than expected.

Phase 3: Second increase (early August to mid September): The main reason for the second increase is that India is expected to ban sugar factory exports from October 2023/2024, leading to an increase in ICE US raw sugar prices and domestic white sugar futures following suit. 2. The domestic sugar market is in the peak consumption season, and the market is passively accepting high prices, leading to a continued increase in sugar prices.

Phase 4: Price decline (late September December): The main reason for the price decline is: 1. In terms of foreign supply, Brazil's sugar production has increased, effectively alleviating market tension. 2. The centralized replenishment of the domestic market has been basically completed, coupled with the release of 126,700 tons of reserve sugar in the first batch of domestic storage announcements, effectively alleviating the tight supply situation. 3. With the arrival of the new squeezing season in 2023/2024, a large amount of white sugar is concentrated on the market, and the price of new sugar is lower than that of old sugar.

Domestic supply and demand situation

Supply increase: The 2023/2024 crushing season is a year for increasing national sugar production, with an estimated output of less than 10 million tons. The domestic market continues to require imported sugar as a supplement, and the linkage between domestic and foreign markets continues to strengthen.

Changes on the demand side: High domestic sugar prices have suppressed consumption, while sugar consumption has remained stable and slightly decreased. The cumulative sugar sales during the 2022/2023 squeezing season were 15.5 million tons, a year-on-year decrease of 500,000 tons; In addition to syrup and premixed powder substitution, there are also some effects of starch sugar substitution. It is expected that during the 2023/2024 squeezing season, the total demand for domestic and industrial sugar consumption will remain stable. However, high sugar prices will expand the impact of substitutes, leading to a slight decrease in sugar consumption. It is expected that the annual consumption of sugar will reach 14.8 million tons, a decrease of 8-10% from the previous year.

Import situation: In 2023, the import profits outside the domestic import quota were severely inverted, with a cumulative import of 3.89 million tons of sugar, a year-on-year decrease of 1.45 million tons. It is difficult for China to supplement the domestic sugar supply gap through imports. If export profits improve in 2024, the sugar import volume for the 2023/2024 pressing season is expected to increase slightly year-on-year. The main reason is that the import quota for the 2022/2023 pressing season can be retained for use in the second year without affecting the issuance of licenses for that year.

The effect of sugar substitution is evident: the total import volume of three items of syrup

Under the high sugar prices of almost a whole year in 2023, the import of raw sugar has sharply decreased. In the fourth quarter, the supply and demand gap was only filled by dumping and storage. With the sudden rise in sugar prices and food processing and beverage factories becoming unable to accept the higher prices of white sugar, they have begun to search for alternatives and new sugar import channels. The import of substitutes has alleviated the sugar shortage in China, and in the future, it is expected that the import of substitutes will gradually increase as the profits from imports outside the quota continue to be inverted.

Foreign supply and demand situation:

On the supply side, ISO predicts that global sugar production during the 2023/2024 crushing season will rise to a record high of 179.88 million tons, higher than the previous value of 174.84 million tons. The increase is mainly due to an increase in Brazilian production.

Brazil's unexpected increase in production: It is expected that during the 2023/2024 crushing season, Brazil's sugar production will reach 46.88 million tons, with a year-on-year increase of nearly 10 million tons, an increase of 27.4%. The sugar production in central and southern Brazil is expected to be 42 million tons.

India's production reduction and exports are subject to policy restrictions: According to the ISMA of the Indian Sugar Association, India's sugar production is estimated to be about 33.5 million tons in 2023/2024. After deducting 3 million tons of ethanol diversion, India's sugar production is 30.5 million tons, a decrease of 7% from the previous year. The production reduction is 2.3 million tons, and the export volume is about 3 million tons. The future export policies of India are complex and variable, and banning or increasing some exports will become important variables affecting the future raw sugar market.

Thailand's production reduction+ export decline: Due to the impact of dry weather, Thailand is expected to reduce production by about 3 million tons during the 2023/2024 crushing season. Thailand has exported a total of 7.45 million tons of sugar during the 2022/2023 squeezing season, an increase of 2% year-on-year. However, as the expectation of reduced production in the new squeezing season gradually becomes clear, Thailand's exports have declined. On October 31, Thai white sugar was listed as one of the government's restricted commodities, so it is expected that Thailand's subsequent sugar exports will also be restricted. The 2023/2024 squeezing season may export 5 million tons.

The international sugar market will enter a range of volatile markets, with excess supply and demand constraining the high points of sugar prices. However, rigid demand growth, changes in trade flow, global low inventory, export parity, and weather will also bring temporary market hotspots while limiting the lower limit of prices. It is expected that the operating range of raw sugar futures prices in 2024 will be 18-25 cents/pound.

Domestically, during the 2023/2024 squeezing season, the domestic fundamentals have significantly improved, with Guangxi's recovery in production and policy dumping, resulting in loose domestic sugar supply. In the first half of the year, from the supply side, new sugar supply is about to be concentrated on the market, with a phased increase in supply. On the demand side, in the macro context of slowing domestic economic growth, high sugar prices have suppressed consumption, and there has been no significant improvement in downstream demand. It will take time for demand to recover, and the expected fluctuation range of white sugar prices is 5,800-6,800 RMB/ton.

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