Sugar cane and sugar prices believed to remain high this year

Experts believe that sugar prices are likely to remain high in the last months of the year, which also means that sugar cane prices will not decrease.

Nearly one month ago, the sugar price dropped to 16,200 dong per kilo, but it then recovered again and stands now at nearly 17,000 dong per kilo.

Material shortage anticipated

In recent days, many farmers in the Mekong Delta, fearing that sugar cane prices would decrease when the main crop comes and concerned about possible floods and storms, have decided to sell crops before harvest to some sugar cane pressing factories.

Though the main crop has not come, the sugar cane price is currently relatively high, at 800-900 dong per kilo, which is higher than the price of the previous crop. Though representatives of sugar refineries have been trying to persuade farmers not to sell sugar cane, farmers ignore their advice and are trying to sell sugar cane.

Sugar refineries sat together and came to an agreement that they will start production for 2010-2011 on September 24. There are about 48,000 hectares of sugar cane fields in the region, which can provide 3.2 million tons of sugar cane. With the current sugar cane pressing capacity of refineries, it is expected that refineries will lack 0.4 million tons of materials.

Therefore, sugar refineries have agreed on a production schedule under which refineries will take turns operating. The move aims to ease the demand for sugar cane that may push sugar cane prices up. In previous years, all sugar refineries ran at the same time, resulting in a serious shortage of materials. At the time, refineries had to scramble for materials.

Since a material shortage is anticipated, the sugar cane price is not likely to decrease in the last months of the year. From July 15 to August 15, the consumed volume of sugar was 46,100 tons, or lower by 16,100 tons than the same period from last year. However, analysts have forecast that the volume of sugar to be introduced into the market will be relatively large in September and October, when demand for sugar increases due to producers beginning production for the Tet sales season.

In general, the demand for sugar increases sharply in September and October, and then decreases in November and December, before rising again volume in January and February of the following year (the volume may sometimes reach 150,000 tons a month). After that, the consumption level remains at 50,000-60,000 tons a month for the remaining months of the year.

Analysts do not think that the sugar cane shortage will happen soon, though the inventory volume is modest at 120,000 tons, just enough for consumption until September 20. Sugar refineries will accept a new production crop in a few days, while companies still have an import quota of 100,000 more tons of sugar this year.

However, analysts believe that sugar prices will greatly depend on domestic refineries. Vietnam will not be able to import cheap sugar from ASEAN countries (products from ASEAN countries only bear five percent import tariffs). Vietnam will only import sugar from non-ASEAN countries, but the products from other countries will be imposed tariffs as high as 30 percent, while importers will have to pay high transportation costs.

At the moment, sugar prices in Thailand are also high (nearly 17,000 dong per kilo) so it is not likely we will see Thai sugar flowing into Vietnam.

Ups and downs

However, when forecasting sugar prices for 2011, analysts say the prices could decrease because of the profuse supply in the world.

World sugar prices are high for short-term contracts, but tend to decrease for contracts with future deliveries. The price of sugar for deliveries in December 2010 is about $544 per ton, but the price for sugar deliveries in May 2011 is only $520 per ton.

Meanwhile, Vietnam does not currently protect its domestic sugar producers. Instead of applying annual fixed quotas for sugar imports or storing sugar to push domestic prices up and encouraging local production, the Ministry of Industry and Trade has continuously increased import quotas. For 2010, the import quota is 300,000 tons, which is large enough to make domestic prices close to world prices.- Thoi bao Kinh te Saigon

Tags: Vietnam Sugar Prices, Vietnam sugarcane