SUPPLY SLUMP SWEETENS POTENTIAL FOR THAI EXPORTS

       The price of sugar has risen to its highest level in 28 years due mainly to severe drought in many countries particularly India, which has resulted in shortage of supply in the global market.
       Thai Sugar Millers Corporation (TSMC) said yesterday that the primary price of sugar cane for the new crop will hit Bt1,150 per tonne, which is the highest since 1982.
       Prakit Pradipasen, chairman of TSMC, said the price will remain at these levels with increasing demand in the world market.
       He added that sugar price in the world market had increased by 20 cent per pound due to decline in sugar production in many countries following drought.
       "Sugar-price trading in the futures market has skyrocketed 24.78 per cent per pound in March 2010. If the price keeps rising, the final price of sugar cane should be higher than the estimated primary price of sugar cane of Bt950 per tonne for the harvesting season 2009/10," said Prasert Tapaneeyangkul, secretary-general of the Office of Cane and Sugarcane Board (OCSB).
       If the final price of sugar cane is higher than the primary price, sugar manufacturers will need to pay the additional amount to sugar-cane growers for that season.
       The primary price of sugar cane in 2008/09 was Bt830 per tonne, while the final price was forecast to be around Bt860 per tonne, he said.
       He is confident the price of sugar cane in 2009/10 will be higher than last season, which should be higher than Bt980 per tonne.
       The main factor pushing up the global sugar price was India, which has shifted from being a sugar exporter to importer because of the drought situation, he said.
       "India's sugar stocks have been decreasing, from 9.3 million tonnes last year to 7.5 million tonnes this year. It will further drop to 5 million tonnes in 2010," he said.
       The Indian Sugar Mills Association has estimated that sugar output in India would reach 19 million tonnes next year from 14.7 million tonnes this year.
       However, it is believed that sugar production would be only 16 million tonnes next year because of poor sugar cane species and the impact of climate change.
       India currently consumes around 22 million tonnes of sugar each year, which has tended to increase following the economic recovery and its huge population.
       Vibul Panitvong, executive chairman of Thai Sugar Millers Corporation, said the price of sugar cane could rise to Bt1,100 per tonne in the year 2009/2010 due to the skyrocketing price of sugar.
       "The higher sugar price will hike the total value of Thailand's sugar exports from US$1.5 billion (Bt51 billion) this year to $2.5 billion in the coming year," he said.
       Besides India, he said the world's largest sugar exporter, Brazil, would also not be able to make up the shortage in supply despite boosting its sugar-cane output.
       "The higher output will go towards serving 30 new ethanol plants in Brazil. Presently, 57 per cent of total sugar cane output in Brazil is used to produce ethanol, and the rest 43 per cent is used to produce sugar," he said.
       Brazil is expected to increase its sugar exports from 31 million tonnes this year to 33 million tonnes next year.
       Due to lower sugar export from India and other countries, it will be a good opportunity for Thailand to boost its exports and for local sugar-cane growers who will be able to sell the sugar cane at a better price.
       The output of sugar cane in 2009/10 is expected to be around 71.6 million tonnes, up from 66.46 million tonnes in 2008/09 as a result of high rainfall. Consequently, sugar production will increase from 7.19 million tonnes to 7.64 million tonnes. However, Thailand's main obstacle is to improve sugar-cane yield and the structure of benefit sharing.
       Vibul said Thai sugar manufacturers have expanded their business to neighbouring countries such as Laos and Cambodia because of limited agricultural areas in Thailand and tariff incentives to export to European Union countries.
       He said Thailand's subsidy system has created price distortions and reduced the overall industry competitiveness.
       In 2007, the Cabinet put the development of the sugar-cane industry on the national agenda, to be completed in three years.
       "It's shameful that though we proposed an annual budget of Bt1.1 billion for three consecutive years, the government has not approved it at all. Therefore, it is difficult for us to move forward with the projects in the national agenda," Prasert said.
       There are five development plans in the national agenda: research and development of cane species, value-added creation of by-products from sugar cane, productivity improvement, alternative energy, and corporate social responsibility.