Sugar price plunges, producers call for intervention

The world sugar price has been sliding and domestic sugar producers also complain that they are incurring heavy losses.

The world sugar price had been escalating continuously since late 2009 and many believed that the price would continue to rise. Forecasts claimed world demand in 2010 would exceed six million tons, while big sugar producers like India would cut their output.

Forecasts were all wrong

Many countries did cut sugar exports to keep sugar cane at home for ethanol production in reaction to fuel price increases.

Importers across the world, including Vietnamese businesses, heard the information and scrambled to purchase more sugar to store, anticipating a shortage and accompanying price increase. This created “sugar fever,” forcing up the price.

In Vietnam, the retail price surged to 25,000 dong per kilo at times. The Government had to allow 200,000 tons of sugar to be imported under preferential tariffs to ease the scramble that caused prices to double within three months.

When 100,000 tons of imported sugar arrived at 15,000 dong per kilo (not including expenses and profit for importers), the world sugar price began sliding.

Currently, according to Nguyen Thanh Long, General Director of Can Tho Sugar Company (Casuco), the wholesale price has dropped to 14,500-14,800 dong per kilo.

Sugar price predictions are moving in the opposite direction since the world’s sugar output is not as low as previously forecast. It is estimated that Brazil will produce 40.5 million tons of raw sugar in its 2010-2011 crop, higher than the output of 36.2 million tons in the 2009-2010 crop. Meanwhile, India’s output may also increase to 25-26 million tons over the 17-18 million tons in the 2009-2010 crop.

Economic experts now agree that the sugar price will decrease further, after dropping by 40 percent from its highest price.

Those Vietnamese companies that imported sugar when the price was high, now sell sugar at great losses.

Producers cry

Long noted that not only speculators, but also sugar plants in the Mekong Delta are suffering from the price drop. Sugar cane alone costs 14,000 dong in producing every kilogram of sugar.

Sugar factories have promised to buy all sugar cane from farmers and they need to run their factories at full capacity to ensure enough jobs for workers.

“The sugar cane price has dropped to 1200-1300 dong per kilo, but the price may be cut further if the sugar price keeps decreasing,” Long observed. “The problem is that the sugar price decreases every day, while sugar factories have to inform about the sugar cane price cut one week in advance.”

Long added that factories are most concerned about consumption difficulties. From February 20 to March 15, as the price began decreasing, sugar factories could sell 73,500 tons of sugar, 40,000 tons less than 2009. Wholesalers dare not take on too much sugar since the price may continue to decline.

“Sugar plants in the Mekong Delta still have 70-80,000 tons in stock. As for Casuco, it now has 10,000 tons, worth nearly 150 billion dong,” Long calculated

The Government needs to provide preferential loans to sugar factories to collect sugar cane from farmers, according to Long. This will help rescue sugar production and the 50,000 hectares of Mekong sugar cane.

Thoi bao kinh te Saigon

Tags: Vietnam sugar, Vietnam Sugar Prices