High sugar prices favour corn-based sweeteners
by 20 per cent in the coming year, as high sugar prices make them
more competitive.
A new report from the US agricultural attaché in Beijing says that while official data on starch-based sweeteners are not available, industry sources expect to see starch sweetener production rise more than 20 per cent to reach 5 million metric tons in 2006-07.
The cost of producing corn sweeteners is lower than for refining sugar and given the ready supply of raw material (China's 2005 corn crop reached a record 134 million tons), these other sweeteners are now priced significantly lower than sugar.
In contrast, sugar production has been lower than expected this year due to a drought in the southern provinces that damaged the cane crop and caused sugar prices to surge. In March standard grade sugar in the southern provinces cost RMB4960 (€515) per ton compared to about RMB2000 per ton during the same period last year.
As a result, the sugar industry is anticipating lower demand for the commodity this year compared with 2005 as food processors switch to cheaper sweeteners. The report forecasts overall per capita consumption of natural sugar to be 8kg during the coming year, unchanged from the previous 12 months.
Further, an industry survey suggests that sweetener production is not yet at full capacity. The sector is thought to have had capacity for 6 million tons in 2005. But more could be coming onto the market.
Xiwang Sugar, China's largest corn sweetener producer with a 34 per cent market share, raised HK$526 million in a recent listing on the Hong Kong stock exchange to fund a major expansion. The firm is said to be planning to increase glucose crystal production capacity to from 250,000 tons to 450,000 tons this year.
However the Foreign Agricultural Service report also predicts a significant change in the market next year, driven by a 15 per cent rise in sugar output during marketing year 2006-07 to 11.1 million tons (raw value).
"Responding to higher sugar prices, cane and beet acreage are forecast to increase by 7 per cent over MY05/06," said the report.
To curb sugar prices from rising further this year, China's government released 200,000 tons of sugar from state reserves in January and is planning to release another 400,000 tons this month.
Although this will reduce stocks compared with previous years, government and industry officials say the level will be replenished in the coming year by a rise in domestic production.
