The data on China from the perspective of the first biannual report from USDA this year, even coming again from a short official comment, point in general to the fifth consecutive increase in sugar production in the country along with a very strong decline in both beginning and ending stocks of the next international 2020/21 crop due to an increase in imports, stability in domestic demand, and reduction in the deficit between the international supply and demand in the country.
Stability in domestic demand reveals the movement of saturation of China’s GDP growth, in view of its ‘new normal’ stage of growth and economic development. Moreover, rising imports are expected to reinforce the replenishment of a fraction of the country’s beginning and ending stocks, which are suffering very sharp declines.
Turning to the USDA’s report, and looking more closely, we have the indication of a production of 10.70 million in the 2020/21 season, up 4.90%, or 500 thousand tons, from the volume of 10.20 million tons of the international 2019/20 season. Domestic demand remains stable with 15.20 million tons in both 2019/20 and 2020/21 seasons. With this, the balance of supply and demand tends to show a deficit of 4.50 million tons, indicating a 10% decrease (reduction of 500 thousand tons in the deficit) over the deficit of 5.00 million tons calculated over the 2019/20 season.
In the meantime, final stocks for the 2020/21 harvest tend to stand at 3.84 million tons, with a decrease of 500 thousand tons between the 2019/20 and 2020/21 crops, indicating a decline of 11.50%. This sharp decrease in final stocks, together with stability in domestic demand, must lead the stock/consumption ratio to 27.31%, down 3.29% from 28.60% in the previous crop. The stock/consumption ratio showed the aforementioned decrease of 6.84% only due to the decline of 11.50% in final stocks in view of the stable domestic demand. As a result, the index between the capacity to meet the demand from the final stocks of the crop is significantly different from the average of 44.89% for the last nine seasons.
Beginning stocks for the 2020/21 season are expected to hit 4.34 million tons, pointing to a decline of 19.20% from the volume of 5.42 million tons in the previous season, which means a decrease of 1.08 million tons. The highest volume of beginning stocks so far was 10.39 million tons in the 2015/16 crop. Imports increased by 2.44% with the demand of 4.2 million tons, advancing 100 thousand tons against the previous season, which hit 4.10 million tons.