Core Logic

Domestic inventories of "old-crop" sugar remain at historically high levels. Coupled with the start of beet sugar processing and market entry in Inner Mongolia and Xinjiang from mid-September—resulting in a concentrated release of new supply—Zhengzhou white sugar futures are facing downward pressure. Market trends have diverged: while international raw sugar prices remain strong due to expectations of a global production decline, the domestic market—weighed down by the "high inventory plus new sugar influx" reality—has failed to follow suit, leaving futures prices fluctuating with a bearish bias.

I. Current Inventory Status

As of the end of August, national industrial sugar inventories stood at 2.22 million tonnes, a year-on-year surge of 91%; significant stocks of old-crop cane sugar from Guangxi and Yunnan remain to be cleared. Although August sales figures showed month-on-month improvement, downstream food and beverage enterprises have largely adopted a "buy-as-needed" and cautious stocking strategy. Consequently, the pace of inventory depletion is sluggish, and inventory pressure is unlikely to be resolved in the short term.

II. Increase in Beet Sugar Supply

Sugar mills in northern beet-producing regions (Inner Mongolia and Xinjiang) are commencing processing operations en masse between mid-September and the post-National Day period. As new beet sugar enters the market, it directly supplements domestic spot supplies and creates price competition for existing old-crop sugar.

Beet procurement prices have been lowered year-on-year, reducing sugar production costs; the competitive pricing of new sugar upon market entry exerts further downward pressure on spot prices.

Inner Mongolia is the largest beet-producing region in China, serving as the primary source of the current increase in supply.

III. Bull-Bear Tug-of-War

Bearish Factors (Price-Depressing)

High inventories of old-crop sugar; slow inventory depletion.

Concentrated market entry of northern beet sugar; increased supply.

Weak recovery in terminal consumption; lack of demand for large-scale stockpiling.

Potential Support Factors

International raw sugar prices remain strong, supported by El Niño effects and a reduction in the sugar-production mix in Brazil; reduced year-on-year arrival volumes of out-of-quota imported sugar have lessened the impact of imports.

Drought conditions in beet-producing regions create potential uncertainty regarding production volume.

IV. Market Outlook

In the short term, Zhengzhou white sugar futures are likely to continue fluctuating at low levels with limited upside potential. A market turning point depends on two factors: ① sustained and rapid inventory depletion in production regions; and ② the emergence of a risk of substantial production decline in the new domestic crushing season. Until inventory pressure eases significantly, any rebound in futures prices is likely to face resistance and pull back.

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