Bitter days for China's sugar industry

China's embattled sugar industry, facing pressure from foreign competitors and technological shortcomings, is caught in the middle of a year-long sales crisis.

According to latest statistics from the China Sugar Association (CSA), manufacturers delivered about 13,318,000 tonnes of sugar in the 2013/2014 "sugar-making period," which lasted from last October to September this year.

But sales of sugar is a mere 77 percent of the same period last year, with 10.24 million tonnes sold by the end of August.

With winter, the industry's slowest season, coming soon the worrisome situation shows no signs of getting better anytime soon.

In Guangxi Zhuang Autonomous Region, China's biggest producer of sugar, some 1.5 million tones of sugar remains in shops. Local farmers are still waiting anxiously for 1.9 billion yuan (309.4 million U.S. dollars) of unpaid money for the sugar cane they sold, according to CSA's Guangxi branch.

Cheng Weijun, who manages the department that oversees trade with the farmers at the East Asia Sugar Factory in Guangxi's Chongzuo City, has felt the pinch in a period usually marked by booming sales.

"By mid-September, only 70 percent of our sugar has been purchased," he said.

The factory produced about 220,000 tonnes of sugar in the 2013/2014 period, which should be sold at least 5,000 yuan per tonne to avoid losses. But as tepid business cast its spell, sugar price is set at around 4,300 yuan, eating away at profits for factories like East Asia.

"It's been a tough year for us," Cheng said.

The spiraling-down industry has taken its toll on farmers as well. Huang Zongxin, manager of the farm business department of Guangxi Funan East Asia Sugar Co. Ltd, said that some farmers have stopped growing sugarcane because of disappointing sales.

"Out of 580,000 mu (38,667 hectars) of our sugarcane planting bases, about 48,000 mu has been changed for vegetables and fruits," Huang told Xinhua.

In Guangxi, strikes by sugarcane farmers have been reported due to unpaid wages.

FOREIGN PRESSURE

Domestic demand for sugar has been dwarfed by imports of the product, disturbing the supply-demand relationship in the country.

Customs data shows from 2011 to 2013, China's sugar imports have almost doubled from 2.92 million tonnes to a record 4.54 million tonnes, accounting for almost one third of domestic production. In the first five months of this year alone, inbound sugar stood at 1.3 million tonnes, a year-on-year increase of 6.7 percent, and that figure does not include smuggled sugar.

Soaring imports are a result of foreign sugar costing less, according to Zhong Zhiyou, vice president of the farm business department of Guangxi Nanning East Asia Sugar Group (GNEASG).

"Even with all taxes included, imported sugar is still cheaper than homegrown products," Zhong said.

As urgency for change mounts, experts have come up with a technical solution for the slinking demand.

Sugarcane was initially introduced from Taiwan. But the type of sugarcane used is susceptible to problems such as pests and low production, said Niu Gongfan, a senior engineer with the CSA's Guangxi branch.

"We have developed our own strand of sugarcane that yields higher production, and we are gradually replacing the old types," Niu said.

Tang Shaoxiong, vice general manager of GNEASG, said new growing techniques is being applied to help local sugarcanes grow better.

"Traditionally, sugarcane is planted on slopes, making irrigation extremely difficult and we could only hope for rainy days," Tang said. "But now we have drip irrigation technique by burying pipelines underneath, which greatly improves production," he added.

Tang also suggested that the government step up efforts to lower costs and improve competitiveness of domestic sugar to survive cut-throat competition.