Sugar producers claim high prices necessary

Sugar sale prices have remained high, despite orders by the Ministry of Agriculture and Rural Development (MARD) to slash prices to affordable levels. Producers have also ignore ministry threats to allow sugar imports to compete with domestic products.

Sugar manufacturers claim that they must raise prices because the world’s prices have escalated. In previous years, government agencies endured big headaches to fight imports smuggled over the Cambodian border. At that time, illegal sugar imports were always lower by 2,000-3,000 dong per kilo, bringing profits of 1,000 dong per kilo after expenses

Sugar smuggling ends

Now, government anti-smuggling agencies sit idle, because they know that smuggled sugar will not enter Vietnam even if the border gate is left wide open.

One deputy director of a big sugar company in the Mekong Delta reported that sugar prices are now the same in Vietnam and Cambodia, making it unprofitable to smuggle. In fact, when the world’s price jumped to $780 per ton, Vietnam’s price stood lower.

At some moments, Vietnam’s sugar price was even lower by 1,000 dong per kilo than in Cambodia. This prompted dealers to collect domestic sugar to export to Cambodia.

Vietnam Sugar and Sugar Cane Association Chair Vo Thanh Dang, responding to charges that sugar companies have been colluding with each other to raise prices, stated that there is no alliance large enough to control sugar prices.

Dang noted that none of the 40 sugar plants has outputs of over 80,000 tons. The Lam Son Sugar Plant has an output of 80,000 tons, but this is just equal to 5-6 percent of the total output.

He also noted that the sugar price in London in March 2010 climbed to $740 per ton. With such rates, imported sugar would be 17,000 dong per kilo in Vietnam.

Sugar companies are wholesaling sugar to first-class sales agents at 15,000 or 16,000 dong per kilo. “As the domestic price is lower than the world’s price, illegal export of sugar may occur,” Dang warned.

Sugar plants making fat profit

The problem lies in the fact that the sugar price has been raised every time it goes through distribution channels.

“There are 100 first-class, thousands of second-class and tens of thousands of third-class distributors. We cannot control them,” Dang admitted.

Sugar plants have been urged to develop distribution networks and retail shops to keep prices low by not forcing products to go through too many intermediaries. However, sugar producers do not intend to do that, because they do not want to borrow money from banks for investment.

Can Tho Sugar Plant is the only company in Mekong Delta that packages and retails sugar, while other sugar plants only wholesale sugar to dairy and confectionary makers and have no retail network.

The wholesale price at 16,000 dong per kilo means that sugar companies are making profits of 30-50 percent, since production costs just 10,000 dong per kilo. Meanwhile, sales agents also benefit from price increases with estimated profits of 20-25 percent.
VietNamNet/TP

Tags: Vietnam Sugar Prices