On Monday (18), China's customs agency released the country's import figures for November/23. According to the agency, the period saw a significant drop, indicating a total of 440,000 tonnes of sugar imported in the month, compared to 920,000 tonnes in October and 730,000 tonnes in the same period last year - a 39.75% drop year-on-year.
Chinese sugar imports ('000 tons)
The drop in imports from the Asian giant comes after China achieved its highest monthly sugar imports on record during November/23, when the country demanded 920,000 tonnes from the international market. Following the record, expectations have been building for a more pronounced return of Chinese imports on the international market, given that the country has seen a significant drop in its imports for much of 2023 - reducing the commodity's domestic stocks.
Sugar stocks in China (million tonnes)
Since March 2023, Chinese sugar imports have been significantly below the five-year monthly averages, a process that followed the sharp rise in #11 prices since the end of 2022. This process, largely driven by a speculative surge amid the effects of El Niño in Southeast Asia, has led the country's import margin to favor consumption of the commodity's stocks, amid a crop around 6.1% smaller, with production of approximately 8.97 million tonnes in 2022/23 (Oct-Sept).
Despite November's downturn, the country is expected to significantly increase its sugar imports in 2023/24, in contrast to the previous crop which fell by 13.7% when compared to the five-season average. Contributing to this, in addition to the drop in carry-over stocks, the sharp drop in sugar on the international market since the end of November, returning to March 2023 levels - around 21 c/lb, should also contribute to the resumption of Chinese purchases.
On the production side, the expectation is that 2023/24, a crop in its third month of harvest, will grow by around 11.5% in production, reaching 10 million tonnes, a scenario motivated mainly by a normalization of the weather in the main sugarcane-growing region in the south of the country - affected by excessive rainfall in 2022. As a result, by the end of the cycle the country could show an increase in production of around 1 million tonnes, which, however, should not be enough to make up for the drop in stocks, estimated at 2.6 million tonnes by the end of the current 2022/23 season.
Sugar production in China (million tonnes, value in white sugar)
*Estimate and Design: StoneX. Source: Chinese Ministry of Agriculture and StoneX.
On Wednesday (20), sugar surprised with yet another downward movement on its international exchanges. For the most active #11 contract (SBH24), sugar retreated by 2.38%, ending the day at the 20.92 c/lb mark - a new low since March/23, after reaching the 27.95 c/lb mark at the end of November, indicating a fall of 25.15% since then. For white #5 SW24, trading showed a milder drop, quoted at USD 605.8/t (-1.53%).
The market has not seen any major changes in fundamentals that would motivate the downturn in New York. However, prices have been under strong pressure from the 2023/24 (Apr-Mar) Brazilian crop, which has renewed its record sugar production every two weeks since the first half of November - it is already 2.35 million tonnes above the last record and should still produce 1.08 MMT by the end of this season. In addition, the perception of improved logistics in Brazilian exports and the liquidation of speculators' positions have contributed to sugar's sharp fall.
