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Vietnam’s sugar industry is in a tough spot

Vietnam’s sugar industry is in a tough spot

Tuesday 19, 10 2021
In recent years, Vietnam’s sugar industry has been in a tight spot due to low prices, reduced planting area, which has caused many sugar factories to operate inefficiently or suffer losses. The 2020/2021 crop year ended on a low note with 17 sugar factories meeting bankruptcy.

Vietnam's sugar industry hit new lows

In the 2020/2021 crop year, although the price of raw sugarcane has increased by about 150,000 - 200,000 VND/ton compared to the 2019-2020 crop year, it is still a difficult year for Vietnam's sugar industry.

In this crop year, output and cultivation area of sugarcane both decreased. 17 out of 41 sugarcane factories went bankrupt or stopped operating. The crop year 2020/2021 is considered the crop year with the lowest output in the past 20 crops.

Agro Processing and Market Development Authority

According to the Agro Processing and Market Development Authority, the total sugarcane cultivation area in the 2020/2021 crop year is 152,891 hectares, down 16.27% compared to the 2019/20 crop. The average sugarcane yield reached 63.0 tons/ha, an increase of 2.44% compared to the 2019/2020 crop. Sugarcane output in the 2020/2021 crop is only 9,635,607 tons, down 14.24% compared to the 2019/2020 crop.

The Vietnam Sugarcane and Sugar Association (VSSA) reported that in the 2020/2021 season, the raw sugarcane materials put into sugar factories were only more than 6.7 million tons, which was low compared to the  7.4 million tons expected at the beginning of the season. Thus, this is the season with the lowest amount of sugarcane consumed and processed in the last 20 crops.

Sugar production for the whole crop year 2020/2021 is more than 900 thousand tons, of which sugar produced from sugarcane is approximately 700 thousand tons, the rest is from imported raw sugar, a decrease of nearly 80,000 tons, equivalent to 10% compared to the previous crop.

Analyzing the causes of the decrease in raw sugarcane output, VSSA said that some cultivation areas had been suffering from drought, storms, and floods, causing a reduction in both the cultivation area, yield, and quality of sugarcane.

Moreover, the price of sugar in the previous crop was low due to fierce competition from cheap imported sugar, smuggled sugar, and commercial fraud. Due to not being subject to taxes such as import tax, VAT, out-of-quota tax, and enjoying price subsidies from the producer, imported sugar overflows into the country at a cheap price of about 800,000 tons per year, causing damage to the domestic sugar industry. Most of the sugar was imported from Thailand, the largest sugar-producing country in Southeast Asia.

the government

In February 2021, the government issued Decision No. 477/QD-BCT on anti-dumping and countervailing duties on sugar from Thailand. With this trade defense, sugar factories raised sugarcane purchase prices. However, because this was just a temporary tax decision and the time of issuance was at the end of the crop season, in the middle of the dry season, it is no longer suitable for new planting in most areas. In this situation, there are not many sources of cuttings and land for new planting, so it is not possible to immediately increase the sugarcane planting area in the 2021/2022 crop.

Forecast for Vietnam's sugar industry

VSSA forecasts that although the situation of the COVID-19 is still complicated, the 2021/2022 crop year will be prosperous for Vietnam's sugar industry after the decision to apply an official anti-dumping tax on cane sugar products originated from Thailand within five years.

Accordingly, in the 2021/2022 season, there are expected to be 24 sugar factories in operation, equal to the number of factories operating in the 2020-2021 crop, with a total design capacity of 122,200 tons of sugarcane a day.

Reports of sugar factories expected to be in operation in the 2021/2022 crop show that the harvest area in this crop will reach nearly 148,200 hectares. The output of sugarcane put into processing will be around 8.6 million tons, sugar output will be about 873,300 tons.

Reports of sugar factories expected

With this production plan, VSSA believes that in the coming time, the sugar industry will have to consolidate and develop the chain of links in sugar production, build a healthy sugar market, develop harmoniously, and prevent sugar trade fraud.

In addition, it is necessary to stabilize the sugarcane material area in the context of climate change and develop sugarcane production according to the principle of precision digital agriculture.

 

Compiled by VietnamCredit

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