According to the notice, the temporary purchasing of sucrose will be conducted in China Merchandise Reserve Management Centre, and the purchasing volume of sucrose will be 1 million tonnes, almost equaling to a month's consumption volume in China. Chinese government plans to carry out the first purchase in two batches, and the first batch of 0.5 million tonnes of sucrose, produced after Oct. 2011, has already started since 10 February 2012. And the basic purchasing price for this sucrose is USD1,039/t, which is close to the product's current average market price.
Continuous decrease of sucrose price is the key reason for Chinese government to purchase sucrose from sucrose producers. Chinese government explained in the notice that the purpose of temporary purchase of sucrose is to stabilize domestic sucrose price and protect the benefit and production enthusiasm of sugarcane growers. In fact, according to China Sugar Index (CSI), the average price of sucrose has decreased continuously since Aug. 2011, which saw the highest level of domestic sucrose price till now. In mid Feb. 2012, the average price of sucrose was USD1065.23/t, decreasing by 15.43% over that in Aug. 2011, which is caused by the oversupply of sucrose. On one hand, Chinese government released seven batches of sucrose stock with a total volume of 1.48 million tonnes to restrain the growth of domestic sucrose price in the first eight months of 2011, which was caused by the insufficient supply of sucrose in the 2010/2011 extraction season; on the other hand, China's output of sucrose may have reached 12 million tonnes in the extraction season of 2011/2012, increasing by about 14.83% over that in 2010/2011.
Some experts expected that the temporary purchasing plan of sucrose may increase the price of sucrose in the near future. Mr. Li, an analyst of sucrose futures, expressed that the sucrose market is in the off-season after the Spring Festival, so the demand for sucrose is relatively weak; however, Chinese government's purchase of sucrose can help sucrose producers relieve the pressure. In fact, sucrose purchasing will be conducted both in production areas and sales areas, which can enhance the effect of sucrose purchasing on the market. As a result, the temporary purchasing plan of sucrose may obviously support domestic sucrose price to rise steadily in the near future.
Undoubtedly, the expected increase of sucrose price will increase sweeteners' competitiveness, directly boosting the demand for sweeteners. Actually, nearly all sweetener producers believe the expected increase of sucrose price will have a positive effect on their products, but the effect may vary with different sweeteners. For instance, most high intensity sweetener (HIS) producers think the effect from sucrose price increase will be small. Because as sucrose's substitute product, HIS are usually priced at much lower prices than sucrose is. Therefore, it is hard for the regular increase in sucrose price to impose large impact on HIS. While starch sugar producers explain that the price decrease of sucrose has reduced their sales to some extent before, and thus the expected price increase caused by the temporary purchasing plan will surely be beneficial for their sales of the product.
Source: Sweeteners China News 1203
Content of Sweeteners China News 1203:
China imported 2.92 million tonnes of sucrose in 2011
Chinese output of soft beverages reaches 117.6 million tonnes in 2011
Shandong Longlive passes review of High-Tech Enterprises in Feb. 2012
Technical necessity and safety of four sweeteners to be evaluated in China
Wanfu Biotechnology's net profit increases in 2011
China exported 16,660 tonnes of xylitol in 2011
Average export price of sucralose decreases by 9.6% in 2011
Market overview of stevia sweetener in Feb. 2012
Overview of crystalline fructose in 2011
Anhui Jinhe's expansion projects of acesulfame-K to launch in June 2012
QHT to expand terminal sales networks through acquisition
HFCS and functional oligosaccharide to be profit growth points of Baolingbao in 2012
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(Guangzhou China, March 8, 2012)
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