HCM City (VNS/VNA) - Thesugarcane sector is facing record-low prices despite an increase of 500,000tonnes of output over last year, leading to high inventory levels, according tothe Vietnam Sugar and Sugarcane Association (VSSA).

Speaking at a conference held in Tay Ninh provinceon September 13, Pham Quoc Doanh, VSSA chairman, said the sugarcane sectorfaced a tough 2017 – 2018 crop as the volume of smuggled sugar remains high andinventories increase.

In addition to the large volume from theprevious crop, the inventory for the new crop as of August 15 had reached morethan 622,000 tonnes, about 67,584 tonnes higher than the same period last year,according to VSSA.

Sugar prices have also been falling in bothdomestic and world markets, with current prices at their lowest level in recentyears.

Sugar mills are selling products at pricesnearly equal to smuggled sugar, and some mills have sold sugar below productioncosts at 11,400-12,000 VND per kilo to reduce inventory.

Compared with previous crops, sugar pricesfell by 3,000-5,000 VND per kilo on average, affecting many enterprises.

Pham Van Duy, deputy head of theAgro-Product Processing and Market Development under the Ministry ofAgriculture and Rural Development (MARD), said falling sugar prices in thelocal market were due to a mismatch between supply and demand in the world market.

The price decrease is just one of theproblems faced by the sugarcane industry. 

For many years, manufacturers havestruggled to maintain profits because mills are small and have low productivityand quality.

Sugar smuggling, mostly from Thailand, hasalso affected domestic manufacturers.

Thailand this year has produced 12 milliontonnes of sugar, up by two million tonnes over the last crop.

Thai sugar is smuggled to neighbouringcountries, including Vietnam, China, Cambodia, Laos and Myanmar.

“Management of smuggled sugarcane has notbeen effective. Cheap smuggled sugarcane imports are difficult to control,while sugar prices in the country are not competitive,” he noted.

In addition, the sugarcane cultivated areathis year is likely to decrease because of falling prices, diseases and climatechange.

In addition, farmers have convertedsugarcane areas to other plants with higher economic value.

Tran Huu Tuan, a sugarcane farmer in Tay Ninh,said to overcome current challenges, the sugarcane industry needs support anddirection from MARD.

“It is now necessary to remove difficultiesfor sugarcane mills to ensure benefits for sugarcane growers,” he said.

Restructuring

To compete with rivals, especiallyThailand, experts recommend that the sugar industry undergo restructuring.

The sector needs to improve the sugarcontent in sugarcane, reduce production costs and eliminate intermediaries inthe sugar distribution process.

In addition, sugar mills need to investmore in technologies to cut costs and improve quality, diversify theirproducts, and produce organic products or sugar products that are good forhealth.

The association will continue to step upmeasures, including fighting against smuggling, establishing technicalbarriers, inspecting the quality of sugar in the market, and tightening checksof imports meant for re-export.

The country’s total sugarcane cultivatedarea reached 274,300ha last year, up 6,000ha compared to 2016, according to areport from MARD.

Last year’s total output reached 17.87million tonnes, up 500,000 tonnes compared to 2016, according to the report.

Vietnam has more than 75 sugarcanevarieties. However, over 90 per cent of sugarcane varieties cultivated in thecountry originated from overseas.

Thirty-seven out of 41 sugar millsoperating across the country have total design capacity of 153,379 tonnes perday, but actual total capacity is only 136,000 tonnes, according to VSSA.

Four sugarcane mills have suspendedoperation, including Hiep Hoa, Kien Giang, Ca Mau and NIVL mills, due to greatlosses.

Co-organised by MARD and VSSA, theconference was held to identify new challenges and seek solutions, particularlyin the context of Vietnam’s readiness to join the ASEAN Trade in GoodsAgreement (ATIGA) in 2020.-VNS/VNA