Thailand. Sugar Annual. Apr 2013 May 8, 2013
TH3037 - Despite an anticipated increase in planting acreage for MY2012/13, sugar production will likely decline to approximately 9.9 million metric tons due to lower-than-expected sugarcane extraction rate caused by drought. MY2013/14 sugar production is forecast to recover to 10.5 million metric tons and will likely boost sugar exports.
MY2012/13 sugarcane production will likely increase to 99.5 million metric tons due to an increase in planting acreage and the construction of new sugar mill facilities. However, sugar production will likely decline to 9.9 million metric tons, down 3 percent from the previous year, due to lower-than-expected sugarcane extraction rates caused by drought. This will likely slow sugar exports, which doubled in the previous year. Meanwhile, MY2013/14 sugar production will likely recover to approximately 10.5 million metric tons in anticipation of a larger sugarcane crop and the improvement in sugarcane extraction rates due to favorable weather conditions. Consequently, sugar exports will likely resume its upward trend to 8.5 million metric tons raw value in MY2013/14 compared to approximately 8.0 million metric tons raw value in MY2011/12 and MY2012/13.
Despite drought conditions during the growing period, MY2012/13 sugarcane production is likely to increase to 99.5 million metric tons, up slightly from the previous year due to acreage expansion and an increase in new sugar mill facilities. The number of Thai sugar mills increased to 51 with total crushing capacity of approximately 1 million metric tons of cane per day, up around 10 percent from the long standing capacity of approximately 0.9 million metric tons of cane per day and 47 mills. Drought conditions, however, affected the cane ripening stage resulting in lower-than-expected sugarcane extraction rates. According to the official MY2012/13 crushing report by the Office of Cane and Sugar Board (OCSB), the average sugarcane extraction rate is at approximately 100 kg/ton of cane, down 4 percent from an average of 104.5 kg/ton cane in the previous year. The MY2012/13 crushing period began around mid-November 2012 and will likely finish by mid-April 2013. Consequently, MY2012/13 sugar production will likely decline to 9.9 million metric tons, down approximately 3 percent from the previous year. Most of Thailand’s sugarcane harvest is primarily used for sugar production and a small amount is used for ethanol production (see TH2064, “Biofuel Annual 2012). This trend is expected to continue as prices for sugarcane feed stocks that are used for ethanol production remain low. Presently, there is only one sugarcane based ethanol plant operating in Thailand producing about 30 to 40 million liters of ethanol per year; using only 0.4 to 0.5 million metric tons of cane per year. In contrast, full sugar production capacity is around 30 million liters per year using approximately 0.8 million metric tons of cane per year.
MY2013/14 sugarcane production is forecast to increase to 102 million metric tons in anticipation of a favorable monsoon season. The average yield will likely improve to approximately 12 million metric tons per rai (75 million metric tons per hectare). In addition, the average sugarcane extraction rate isexpected to recover to 103-104 kg/ton of cane, thus, likely pushing sugar production slightly higher to approximately 10.5 million metric tons.
MY2011/12 sugar consumption increased to approximately 2.5 million metric tons, up around 5 percent from the previous year as the Thai food and beverage industry recovered from the nationwide flooding that occurred in the last quarter of 2011. Industrial use, which accounts for 40 percent of total sugar consumption, increased approximately 3 percent during the same period. Sugar consumption in the beverage industry, which accounts for approximately half of total industrial use, increased significantly to 11 percent from the previous year. Household sugar consumption, which accounts for around 60 percent of total sugar consumption, increased approximately 6 percent during the same period.
MY2012/13 and MY2013/14 sugar consumption will likely trend upward to 2.7 and 2.8 million metric tons, respectively, in anticipation of growing household and industrial use driven by strong domestic economic growth of 5 to 6 percent. In addition, the beverage industry, particularly soft drink manufacturers, are expanding their new facilities which will likely result in a 30 to 40 percent increase in their production capacities in MY2012/13.
Sugar exports in MY2011/12 increased to 7.9 million metric tons raw value (MMTRV), up 19 percent from the previous year due to acreage expansion. Raw sugar exports, which account for approximately 60 percent of total sugar exports, continued to increase significantly to around 5 MMTRV, up 21 percent from the previous year. The increase reflected a surge in raw sugar exports, particularly to China and Taiwan, which more than tripled from the previous year due to insufficient domestic supplies. In addition, raw sugar exports to Indonesia, which is Thailand’s largest raw sugar export market increased to 1.8 MMTRV. Thai sugar exports to Indonesia account for approximately 30 percent of total raw sugar exports. White and refined sugar exports also increased significantly to 2.9 MMTRV.
Sugar export growth in MY2012/13 will likely decelerate to approximately 8 MMTRV due to a reduction in sugar production caused by drought. Export of raw sugar to China will likely decline significantly in anticipation of increased Chinese sugar production. The reduction in raw sugar exports to China is expected to be offset by a continued increase in raw sugar exports to Indonesia, which has insufficient domestic production. In addition, Thailand will likely be able to fulfill its FY2013 U.S. raw sugar cane tariff rate quota of 15,027 MMTRV.
MY2013/14 sugar exports are forecast to increase to 8.5 MMTRV in anticipation of a recovery in sugar supplies as a result of favorable weather conditions. Raw sugar exports will likely increase to 5.3 MMTRV compared to 5.0 MMTRV in MY2011/12 and MY2012/13.
Meanwhile, sugar imports should be marginal due to the large supplies of domestic sugar. Furthermore, Thailand’s high tariff rates are likely to deter sugar imports. Currently, Thailand subjects imported sugar to a 65 percent tariff rate and a quota of 13,760 metric tons. Its out-of-quota tariff rate is 94 percent.
MY2011/12 sugar stocks are revised down to 2.8 million metric tons due to higher-than-expected sugar exports and the recovery of domestic sugar consumption by the food and beverage industry. Sugar stocks will likely continue to decline to 2.1 million metric tons in MY2012/13 and approximately 1.3 million metric tons in MY2013/14 in anticipation of growing domestic consumption and continued increase in sugar exports.
The support price for sugarcane production in MY2011/12 was set at 950 baht/ton ($31.7/MT), down 5 percent from 1,000 baht/ton ($32.3/MT) in the previous year due to a reduction in global sugar prices. In addition, on March 19, 2013 the Thai Cabinet approved direct payments to farmers totaling 160 baht/ton ($5.3/MT).
The downward trend in global sugar prices will likely prompt the government to maintain its price control policy on sugar that was established in May 2008. The 2008 policy fixed prices at 19 baht/kg ($29 cent/lb) for refined sugar, ex factory wholesale (excluding 7 percent value added tax). Retail sugar prices (including the value-added tax) will also remain at established 2008 prices at 21.85 baht/kg ($33 cent/lb) for white sugar and 22.85 baht/kg ($35 cent/lb) for refined sugar. The government will use the value-added tax collected from domestic sugar sales to repay the Bank for Agriculture and Agricultural Cooperatives (BAAC) for the costs of operating the state-run Cane and Sugar Fund (CSF). The CSF provides the funds necessary to carry out the various sugar programs such as the price support and direct payment programs. In addition, in fiscal year 2012/13, the CSF provided funding for a harvester purchasing program totaling 3 billion baht ($100 million), up from 1 billion baht ($33 million). The harvester program enables farmers and sugar millers to obtain low interest loans to purchase cane harvesters. The demand for harvesters is a result of the growing labor shortage in Thailand and an increase in the national minimum wage (300 baht/day ($100/day) in 2013 compared to 150-250 baht/day ($5-8/day) in 2012)