Report Highlights: 

TH3087 MY2012/13 sugar production and sugar exports are likely to decline due to weather conditions and the global economic slowdown. Meanwhile, MY2013/14 sugar production is likely increase due to anticipated favorable weather conditions. This will likely boost sugar exports up to 8-9 million metric tons in MY2013/14.

Executive Summary: 

Despite higher-than-expected MY2012/13 sugarcane production, sugar production will likely decline to 10 million metric tons, down 2 percent from the previous year due to low sugarcane extraction rate caused by drought. Meanwhile, sugar consumption and exports are revised down due to the economic slowdown. Sugar exports are likely to decline to 7 million metric tons, down 11 percent from the previous year as a result of a slip in raw sugar exports. MY2013/14 sugar production is revised up to 11 million metric tons, an increase of approximately 9 percent from the previous year due to anticipated favorable weather conditions. This is expected to push sugar exports higher to approximately 8-9 million metric tons in MY2013/14. Meanwhile, cane growers are concerned about the slide in domestic prices and have asked the government for price supports around 1,200 baht per metric ton. However, the government has not yet finalized the price support for sugarcane production in MY2013/14. 

1. Production 

According to the official MY2012/13 crushing report by the Office of Cane and Sugar Board (OCSB), sugarcane production is slightly higher than expected at approximately 100 million metric tons, a 2 percent increase from the previous year due to acreage expansion. However, overall sugar production declined to 10 million metric tons, down 2 percent from the previous year due to drought conditions. The dry conditions affected the cane ripening stage resulting in low sugarcane extraction rate at 100.2 kg/ton of cane, a 4 percent decline from an average of 104.5 kg/ton from the previous year. In addition, the production of sugarcane used for ethanol production is revised up to approximately 660,000 metric tons due to acreage expansion. The larger planting area was a result of higher gasohol consumption fueled by the government’s cancellation of Octane 91 gasoline sales (please see TH3056, Biofuel Annual 2013). 

MY2013/14 sugarcane production is revised up to approximately 106 million metric tons, an increase of 5 percent from the previous year as a result of anticipated favorable weather conditions. The average sugarcane extraction rate is expected to recover to 104 kg/ton of cane. This will likely push sugar production higher to around 11 million metric tons, up approximately 9 percent from the previous year. The production of sugarcane used for ethanol production is also expected to increase to 0.7 million metric tons due to continued strong domestic gasohol consumption. The sole Thai sugarcane-based ethanol plant is operating close to full capacity at 60 million liters per year (or 0.2 million liters per day) using approximately 0.8 million tons of cane annually.

2. Consumption 

MY2012/13 and MY2013/14 sugar consumption is revised down to approximately 2.6 – 2.7 million metric tons due to the slowdown in domestic economic growth. The government revised down its economic growth forecast to 3.7 percent in 2013 and 5.1 percent in 2014 as compared to its previous forecast of 5-6 percent. The modified forecast is due to the slowdown in the global economy and the delay of government spending, particularly on mega public works projects. In the first half of 2013, domestic sugar consumption growth was lower than expected at 2.4 percent compared to the previous annual forecast of 5 to 6 percent. The slowdown is a reflection of lower-than-expected sugar demand for industrial use, particularly in the beverage industry which accounts for around half of total industrial use. The consumption of sugar in the beverage industry declined approximately 2.5 percent from the same period last year. Meanwhile, total industrial use which accounts for around 40 percent of total sugar consumption increased slightly by 0.6 percent from the same period last year as the Thai economy faced a technical recession in the second quarter of this year. 

3. Trade 

MY2012/13 sugar exports are revised down to 7 million metric tons which is likely to decline 11 percent from the previous year due to lower-than-expected exports of raw sugar. In the first half of 2013, raw sugar exports to China declined significantly due to an increase in Chinese sugar production. Meanwhile, exports of raw sugar to other importing countries are lower-than-expected due to the global economic slowdown. Furthermore, Thailand did not fulfill its FY013 (October 1, 2012 – September 30, 2013) U.S. raw sugar Tariff Quota (TRQ) as export prices under the TRQ were approximately 10 percent below world market prices. MY2013/04 sugar exports are revised up to 8.7 million metric tons in anticipation of higher exportable supplies resulting from larger carry-over stocks and bumper sugarcane production. Raw sugar exports are likely to increase to 5.5 million metric tons compared to 4 million metric tons in 2012/13. Exports are expected to accelerate in the second quarter of 2014. 

4. Stocks 

MY2012/13 sugar stocks are revised up to 3.3 million metric tons due to lower-than-expected domestic sugar consumption and a drop in raw sugar exports. Sugar stocks will likely decline to 2.8 million metric tons in MY2013/14. 

5. Policy 

Price supports for sugarcane production in MY2013/14 will likely be lower than MY2012/13 which was set at 950 baht per metric tons ($30.6/MT) due to a reduction in global sugar prices. The 950 baht price represented a 7.5 percent decline from the previous year. The government, however, has not yet finalized the price supports for the MY2013/14 sugarcane crop. Farmers are seeking a support price of 1,200 baht per metric ton