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China on alert as sugar shortage signals new front in global food crisis

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Orange Wang, South China Morning Post

<div>Several nations have moved to limit sugar exports since the war in Ukraine started, fearful about food security as global agricultural prices rise</div><div>As countries move to restrict supply, China’s agricultural ministry has cut its forecast for domestic sugar output in the current marketing year</div>Anxiety about a looming global food crisis has ratcheted up a notch as spillovers from the Ukraine war spread from grain to sugar, while export restrictions imposed by many countries are expected to keep driving up prices.<ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/business/05/25/22/after-wheat-india-caps-sugar-exports">After wheat, India caps sugar exports</a></li></ul>Though the world&#x27;s least developed countries are likely to be hit hardest by higher sugar prices, China&#x27;s sugar output is tipped to be lower than expected this year, meaning more imports will be needed to meet domestic demand.There are signs, however, that Chinese consumption of sugar is already falling amid rising import costs and strict coronavirus controls.Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.Several nations have moved to limit exports of key commodities since the war in Ukraine started in late February, fearful food security is under threat with agricultural prices rising.Kazakhstan started a six-month-long ban on white and cane sugar exports on Monday.Pakistan imposed a &quot;complete ban&quot; on sugar exports earlier this month, worried about high inflation. Russia in March also banned sugar exports until the end of August following Western sanctions over its invasion of Ukraine.Various sugar cane mills in Brazil, the world&#x27;s top producer and exporter, are reported to be cancelling some export contracts and shifting production to ethanol to cash in on high energy prices, which have also been pushed up by the war in Ukraine.&quot;For sugar, it&#x27;s relatively easy for Brazilian mills to switch production to ethanol production if the economics make sense, and this can push global sugar markets higher,&quot; said Darin Friedrichs, a founder and market research director at Sitonia Consulting, a Shanghai-based commodities analysis firm.&quot;With food prices rising rapidly, there have been more countries looking to cool domestic inflation by limiting exports, but this can disrupt supply chains and lead to higher prices on the global markets.&quot;In particular, as both food and energy prices are rising, there is increased focus on the use of food for the production of fuel.&quot;Sugar is regarded as a strategic resource by many countries, since it can be used not only in food, but for producing ethanol that can have a wide range of applications, from medicine to explosives.Global commodities trader Louis Dreyfus said earlier this month Brazilian mills would divert a larger-than-expected amount of sugar cane to ethanol production, warning that could prompt &quot;a shortage of sugar&quot;.Concern is growing that the war in Ukraine is aggravating risks to global food security. Food production has also been buffeted by shocks from the pandemic, climate change, and inflation fuelled by monetary easing among major economies.David Beasley, executive director of the United Nations World Food Programme, warned the world is facing its worst hunger crisis since World War II at the World Economic Forum in Davos on Monday.He warned that &quot;a significant pricing problem&quot; is likely over the next 10 to 12 months, noting some 325 million people around the world are currently close to starvation, quadruple the number from five years ago.Twenty countries and regions have food export bans in place, including for wheat, soybean, beef, butter and sugar, according to the data from the International Food Policy Research Institute.Despite mounting concern about sugar supply, Dong Xiaoqiang, commercial head of AB Sugar China, said he did not expect a global shortage this year, as top producers were increasing production.India and Thailand - the world&#x27;s second largest sugar producer and No 2 exporter, respectively - are likely to see higher output in 2022, he said.&quot;What&#x27;s happened recently is more a show of emotional tension over the supply of food including sugar,&quot; he said. &quot;Most countries that announced export bans are small sugar producers with a tight balance between supply and demand, and not many contracts have been cancelled in Brazil.&quot;Domestic sugar supply is insufficient mainly in the Middle East, Southeast Asia and Africa.&quot;When the supply from major exporters is ample, they will not be short of sugar, but the prices will be higher than last year,&quot; Dong said.Analysts from China Futures also expect more output from India and Thailand to offset a potential drop in Brazilian production this year. But cheap sugar may not be as readily available as global inflation and New Delhi&#x27;s move to cut export subsidies push up production costs.The Indian government will cap sugar exports at 10 million tonnes for the marketing year that runs through September to safeguard its own food supply, according to a statement from the food ministry late on Tuesday.But annual output of 10 million tonnes would still mean the South Asian country is on track to reach record high sugar exports.Nevertheless, as global sugar prices rise, so will China&#x27;s import costs.China is one of the world&#x27;s largest sugar producers, but still relies on imports for around one third of overall supply.In 2020, China removed a protective tariff on sugar and renewed a management regulation for the state reserve of sugar.As countries move to restrict exports, the Chinese agricultural ministry has cut its forecast for domestic sugar output in the current marketing year to 9.72 million tonnes from 10.07 million tonnes, a drop of nearly 9 per cent from a year ago.&quot;The national sugar output is lower than expected,&quot; said the ministry&#x27;s Chinese Agriculture Outlook Committee in a report earlier this month, citing the impact of bad weather and Covid-19 outbreaks.China&#x27;s sugar imports rose by 134.5 per cent from a year ago in April after falling for six straight months, with Brazil the largest source with a share of nearly 77 per cent.Domestic sugar prices on Tuesday rose slightly by 5.7 per cent from a month earlier, although they were still lower than the cost of imported alternatives.Dong said China&#x27;s sugar supply chain was safe, with 7 to 8 million tonnes in national reserves.The country&#x27;s recent virus outbreaks are weighing on domestic demand, a trend reflected in sharp falls in retail sales and catering sector revenue in April from a year earlier. Coronavirus control measures have also affected logistics.&quot;Right now there&#x27;s a noticeable drop in consumer discretionary spending in the food and beverage category, even for cities without outbreaks or lockdowns. Because of this, it&#x27;s difficult to be optimistic about sugar demand in China,&quot; said Friedrichs.<div>Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.</div><ul class="op-related-articles">	<li><a href="https://news.abs-cbn.com/business/03/08/22/supplier-backs-sugar-importation-to-address-deficiency">Supplier backs importation of refined sugar to address deficiency</a></li></ul><figure class="op-interactive"><iframe allow="autoplay; fullscreen" frameBorder="0" height="100%" id="ivsplayer01" scrolling="no" src="https://player.ivideosmart.com/ivsplayer/v4/dist/html/iframe-src.html?iframeid=ivsplayer01&amp;key=e8c22c015ca9eafa76f1e3edfa03c603&amp;spid=3001339&amp;vid=2022654" width="100%"></iframe></figure><div class="iwantbar">Watch more News on <a href="https://www.iwanttfc.com/#!/browse/Genres/News/tag_id_genres/id_news" target="_blank">iWantTFC</a></div>

Anxiety about a looming global food crisis has ratcheted up a notch as spillovers from the Ukraine war spread from grain to sugar, while export restrictions imposed by many countries are expected to keep driving up prices.

China on alert as sugar shortage signals new front in global food crisis

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China on alert as sugar shortage signals new front in global food crisis

Orange Wang,

South China Morning Post

Published May 26, 2022 07:33 AM PHT

Read More:

food security

sugar

food crisis

sugar shortage

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