(Yicai) Sept. 15 -- The Zhengzhou Commodity Exchange will assist the high-quality development of China’s sugar industry by increasing the variety of futures and exploring more white sugar short-term options and international raw sugar futures, the vice general manager of the exchange said at a recent forum.

The Zhengzhou Commodity Exchange needs to provide solid services to the sugar industry, Yu Xuanfeng said at the white sugar subforum held at the 2023 China Zhengzhou International Futures Forum on Sept. 8. It should continue to refine trading and payment rules and optimize the layout of collection warehouses to make it easier and more efficient for companies to participate, he added.

Over the years, the white sugar futures market has gradually matured and has become an indispensable tool in business operations, Wu Zhen, general manager of Cofco Sugar, said at the forum. White sugar options in particular can greatly help in business operations.

The relation between spot white sugar and white sugar futures has been as high as 0.99 since the start of the year, suggesting that the price discovery function is working well, Yu said. Producers of over 85 percent of China’s white sugar are engaged in hedging operations through the exchange’s futures, numbering over 2,300, he added.

Complicated Situation

China’s sugar industry is facing challenges as the global market situation has been complex since last year.

Energy supplies are very important amid the global energy crisis, said Pan Yiping, head of the sugar department at Yihai Kerry Shanghai International Trading.

Whether or not sugar producers can reduce their reliance on conventional energy is key for the industry's long-term development, Pan said.

Demand for grain is increasing worldwide yet the area of available cultivated land remains limited, and this has had an impact on the price of sugarcane and sugar beet, Pan said.

As carbon saving and emission cuts become a key topic worldwide, sugarcane ethanol is considered an important means of achieving carbon neutrality as sugarcane has properties of carbon sequestration, said Pan.

Climate change has led to the frequent outbreak of natural disasters such as floods, drought and mountain fires, damaging crops. By comparison, sugarcane is more resistant to extreme weather thanks to its scattered planting areas, he said.

Sugar consumption is not growing fast in China as many people prefer to use sugar substitutes, said Zhong Jinchuan, vice president of the China Sugar Association. Based on production and operation conditions, business owners should use hedging strategies to safely manage market risks. Investors should also take note of both opportunities and risks and participate in trading activities in a prudent manner.

Editors: Xu Wei, Kim Taylor