Analysis on influence of COVID-19 outbreak in sugar industry 02-12-2020

Summary: Affected by the COVID-19 outbreak, many places have suffered the lack of labour for sugarcane chopping and transport, closure of the village and blocked roads, resulting in hindrance on sugar production. In addition, due to the epidemic still at its peak, the time for resumption of work in main sugar marketing areas has been postponed no earlier than 9 Feb. For prevention and control of the epidemic, residents reduce outings for procurement, and local traffic control restricts trade flows, causing an adverse impact on sugar consumption

The development of COVID-19 will have a direct effect on the production and consumption of sugar industry in the short term. In order to prevent and control the epidemic, the frequency of residents going out will be reduced within 1–3 months, leading to a negative impact on social services and enterprise production, sales, logistics.

On the production side, the COVID-19 outbreak has prevented the progress of domestic sugar production in China.

The COVID-19 outbreak has led to the manpower shortage of sugarcane harvesting in Guangxi Province, causing a hindrance on sugar production. In central and southern Guangxi, Vietnamese workers no longer cross the border to cut sugarcane in China; in northern Guangxi, local governments have quickly started traffic control after the outbreak; the roads around the villages and towns of sugarcane areas have been blocked to restrict external population flows. Other regional sugar factories have said that production has been significantly affected. For instance, a dual-line sugar factory only remains single-line production; few sugarcane carrier vehicles get into the factory, and so on. In addition, because of the previous drought, the newly planted sugarcane land could not be reclaimed and planted. After long-lost and large-scale effective rainfall in Guangxi during the Spring Festival, farmers temporarily abandoned cutting sugarcane, giving the priority to plant new sugarcane, resulting in less manpower for sugarcane harvesting. Considering the negative impact of the COVID-19 outbreak, Guangxi Sugar Market Network Co., Ltd. (GSMN) slashed its estimated sugar yield in Jan., from more than 2.00 million tonnes to about 1.80 million tonnes.  

In addition, according to the China Sugar Association, Yunnan Province and Hainan Province have suffered a YoY decline in sugar production due to the influence of the epidemic:

·         Affected by the lack of labour for sugarcane chopping and transport, closure of the village and blocked roads everywhere, Hainan Province is faced with a serious hindrance on sugar production. By 31 Jan., 2020, the accumulated processing volume of sugarcane was 390,400 tonnes, a decrease of 287,300 tonnes YoY, and sugar output of 51,100 tonnes, reduced by 28,900 tonnes (excluding goods in-process).

 

·         As of 31 Jan., 2020, Yunnan Province had processed 3.94 million tonnes of sugarcane, down by 151,000 tonnes YoY, and produced 462,900 tonnes of sugar, down by 18,500 tonnes YoY.

On the consumer side, the COVID-19 outbreak has restricted sugar consumption in China.

·         The COVID-19 outbreak has affected domestic sugar consumption and trade flows. Because the epidemic is still at its peak, Guangdong, Fujian and other important sugar marketing areas have postponed the time for resumption of work no earlier than 9 Feb. Secondly, since people are confined to the house instead of go out purchasing at will, the consumption is basically in the stagnant state. Some provinces and cities close the roads, so the capacity limit causes the normal sugar trade to be greatly affected.

 

·         The epidemic has exerted a passive influence on China's economic development. Forecast by domestic authorities, the COVID-19 outbreak would decrease the GDP growth by 0.50 percentage point to around 5.50%. A slowdown in macroeconomic growth will generate an adverse impact on the domestic sugar consumption market.

 

·         Due to the uncertainty about the duration of the epidemic, the phenomenon of snapping up daily necessities appears in some of the worst-hit areas. During the 2003 SARS period, panic buying due to the outbreak drove a short-term rise in sugar prices, which eventually fell as supplies return to normal after the epidemic gone. 

 

You can also find out more information about the article at CCM Sweeteners China Newsletter or email emarket1@cnchemicals.com.

 

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