SunSirs: Positive Factors, Sugar Prices reached a New High in in the First Half of 2023

According to the monitoring of the commodity market analysis system of SunSirs, the average price of first grade white sugar was 5,786 RMB/ton on January 1, and 7,146 RMB/ton on July 3, with a price increase of 23.51%. The price has increased by 21.65% compared to the same period last year. In the first half of the year, the highest price of white sugar was 7,196 RMB/ton, and the lowest price was 5,740 RMB/ton.

Phase 1: Slowly Rising Phase (January-February)

In early January, India reduced production by 3.63%, serving as a market regulator and reducing quotas drove up prices.

Phase 2: Significant increase phase (March-May)

Internationally, in March, India and Thailand accelerated their contraction, with clear signs of production decline. The global sugar supply and demand gap will further expand to 5.93 million tons, and the inventory consumption ratio is expected to further decrease by 3.78%. Global sugar supply will continue to be tight. On the domestic side, due to the severe autumn drought in 2022, Guangxi's sugarcane sugar production during the 2022/23 squeezing season was lower than expected, which has had a certain impact on the national sugar production. The estimated total sugar production is 5.25 million tons, a decrease of about 870000 tons compared to the previous squeezing season. The increase in import costs from abroad has led to a significant decline in domestic import volume, and the effective supply in China is tight. Inventory has dropped to a 10-year low.

Phase 3: High level oscillation stage (June-July)

The latest export and port waiting vessel numbers in Brazil show that the recent congestion in Brazilian export ports has eased, and the export capacity of sugar in Brazilian ports has rebounded significantly, easing the tight supply situation in the international sugar market. As of the first half of May, 78.968 million tons of sugarcane were extracted from the central and southern regions of Brazil, an increase of 24.18% year-on-year, and a cumulative sugar production of 4.063 million tons. On the domestic side, due to the significant increase in prices, downstream consumer manufacturers have adopted "use as you go" and overall consumption has shifted back. In addition, the price difference outside the quota is relatively large, with an average import profit of around -1200. This has greatly suppressed the import outside the quota, and some processing sugar factories have a low willingness to purchase.

The main reasons for the increase in domestic white sugar are as follows:

Small reduction in production during the domestic 22/23 crushing season

In the sugar production period of 2022/2023, a total of 8.72 million tons of sugar were produced nationwide, a year-on-year decrease of 170,000 tons, resulting in tight supply in the domestic sugar market. Due to varying degrees of drought in sugarcane producing areas such as Liuzhou and Laibin in Guangxi from July to November 2022, as of March 2023, a total of 41.2106 million tons of sugarcane were squeezed in Guangxi, a year-on-year decrease of 8.4284 million tons; The production of mixed sugar reached 5.2677 million tons, a year-on-year decrease of 778,500 tons.

Reducing production in main production areas drives up international sugar prices

As the world's largest producer of white sugar and the second largest exporter, India's sugarcane production has decreased due to adverse weather conditions. As of the end of March 2023, India's sugar production during the 2022/2023 crushing season was 29.96 million tons, a decrease of 3.4% from 30.99 million tons in the same period last year. As of April 7, 2023, sugar prices on the New York Futures Exchange rose 2.2% to 23.46 cents per pound, a new high in six years.

Promotion of alternative products during peak consumer seasons

June to August is the peak season for white sugar consumption. The price of white sugar continues to be high, and downstream users are forced to accept it. As the international raw sugar price rises to a high level, the price difference between substitute syrup, premixed powder, fructose syrup, etc. and white sugar continues to open, and the market demand further expands. Some downstream users are interested in the long-term alternative value of starch sugar and Glucose syrup, and further develop the market share of substitute sugar.

Internationally, the gap in the 2023/2024 squeezing season has narrowed compared to the 2022/2023 squeezing season, mainly considering the recovery of sugar production in the Brazilian region. From May to June, under the extremely favorable dry weather conditions for squeezing in Brazil, production is expected to increase significantly. Domestically, sugar supply remains tight, and sugar prices have not yet turned around this season. Spot prices are strong, and it is expected that domestic sugar prices will mainly fluctuate at high levels in the short term.

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