Vietnam Expects a Sweeter Sugarcane MY 2021/22 with Higher Prices

Published 2021년 12월 20일

The Vietnamese Sugar and Sugarcane Association has forecasted that the recently started MY 2021/22 would be a more prosperous year for the domestic sugar industry as the domestic sugar price has started to recover significantly. Since late November, the domestic wholesale sugar price is currently above USD 0.90 per kg, the highest price in the past five years. In those five years, Vietnam’s sugar industry has experienced a continuous fall in prices and a significant decline in its productive area as a consequence. However, a recent sharp increase in global sugar prices, and the government’s new anti-dumping policy on sugarcane products from Thailand, have impacted local prices.

The sugarcane industry in Vietnam has experienced many ups and downs over the years, but since 2017, the wholesale price of sugar decreased to only USD 0.50 per KG, and sugar inventory was full in sugar refineries as a consequence. Additionally, tariffs on sugar imported into Vietnam have decreased from 85% to just 5%, especially for Thai sugar. Thus, the quantity of imported sugar has increased dramatically, affecting the domestic production of sugar. With the recent rise in the global sugar price and governmental support, sugarcane farmers are hoping to revive the industry after many years of affliction.

Decrease in Sugar Value has Brought Considerable Reduction of the Planting Area

According to the Vietnamese Sugarcane and Sugar Association, due to declining prices of sugarcane over recent years, thousands of farmers have abandoned sugarcane and switched to other crops. Those who still stick to sugarcane are farmers with a tradition of growing sugarcane for many years. The sugarcane area has decreased sharply from 300K hectares in 2015 to only 130K hectares in 2020, all concentrated in Hau Giang, Soc Trang, and Tra Vinh provinces. As a result, sugar production in the country has significantly decreased as well. For MY 2020/2021, nearly 11M MT of sugar were produced while the annual average is more than 17M MT.

Source: Tridge

The decrease in sugarcane activity in the main producing areas has also caused, in some cases, the closure of plenty of refineries in the three main provinces. From ten sugar refineries, the Mekong Delta region now has only three refineries struggling to maintain operations. The fall in prices and the increase in imported Thai sugarcane has caused severe inefficiencies and losses to many sugar mills in Vietnam for several years now.

A Better Global Scenario for the New MY with Support from the Local Industry

As the MY 2021/22 has begun, the domestic sugar price has increased sharply, driven mainly by the rise in global price and higher demand from sugar factories due to the reduction of Thai sugarcane imports. As a result, as of the 1st of December, the domestic wholesale sugar price was above USD 0.90 per kg, the highest price in the past five years. The retail price of granulated sugar ranged from USD 1 to USD 1.2 per kg, while in supermarkets, it was at USD 1.2 to USD 1.3 per kg.

Domestic sugar prices have risen again due to several reasons regarding global dynamics in the sugar trade. The first one would be that the global sugar price level rose sharply to USD 560 per ton (USD 23 per pound), nearly USD 100 per ton higher than last year. Additionally, The Ministry of Industry and Trade issued Decision No.1578, which applies an official anti-dumping and anti-subsidy tax on sugarcane products originating from Thailand for five years. This has caused Thai imports to fall, which subsequently has generated higher demand for local sugarcane production.

Source: Macrotrends

Additionally, the domestic sugar industry has also supported the rise of the wholesale price from farmers. Catie Bui, Tridge’s representative in Vietnam, recently reported that sugar factories have increased sugar prices to support local farmers. “Farmers in sugarcane growing areas are entering the harvest season, and the businesses all announced an increase in sugarcane prices. The price of raw sugar cane ranges from VND 880,000 (USD 40) to VND 1,180,000 (USD 50) per MT, a sharp increase compared to the previous crop. At this price, sugarcane farmers are expecting to earn more profits”, she informed. Sugar factories support farmers by purchasing sugarcane at a higher price than last season's harvest to encourage sugarcane growers to keep producing for sugar factories.

An Essential Moment for Modernizing the Industry

With government policy support and the recovery of crop areas, Vietnam is predicted to observe a peak in its sugar production in the coming years. However, the long-term problem of the Vietnamese sugar industry is the high production cost, which has been uncompetitive with sugar-producing countries in the Asian region. Furthermore, the harvesting activity has not yet been fully mechanized or automated. Thus, the labor cost for the sugarcane harvest is still extremely high.

Therefore, the potential revival of the sugar industry in Vietnam needs to be linked to the modernization of the industry in the sugarcane harvest methods, such as refining and milling processes. Government efforts would require more than the relevant trade policies into a more significant investment scale for the complete modernization of the industry.

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