Vietnam Sugar Industry: Much Needs to Be Done

 

Cane production suffered a big decline in terms of planting area, productivity and output in the last crop. The operated capacity rate of sugar factories was only 60.7 percent on average compared to the designed capacity. Furthermore, the capacity was 83.3 percent lower than the previous crop. The country’s sugar cane area is plummeting. As reported by the agriculture sector of Mekong Delta provinces, the 2009-2010 crop output reduced to about 60,000 hectares, or by nearly 10,000 hectares compared to the previous crops. The sugar cane planting area in other regions like the South East of Vietnam is also being narrowed down to make room for other short-term farm produces.

A number of shareholders of Bien Hoa Sugar JSC, one of the leading companies in the sugar industry with popular products, was disappointed about the company’s business outcome in 2008. The main reason for this unsatisfactory outcome is the shortage of materials. At present, the annual total harvested sugar cane amounts to only 50 percent of the capacity of its two factories in Tri An, Tay Ninh and one in Bien Hoa. Facing the same situation, big brand names such as Mimosa and Casuco are now suffering a series of difficulties due to the material shortage. Casuco was forced to stop pressing sugar cane in May 2009 when the sugar cane crop ended and expected to resume its operation in mid September.

 

As reported by the Vietnam Sugar and Sugarcane Association, the 2008 - 2009 sugar cane crop ended in serious material shortage with a series of factories closed down. As a result, there was a lack of about 200,000 tonnes of sugar compared to the plan. The 2009 – 2010 crop continues suffering ups and downs when farmers become unsatisfied with their crop and choose to replace sugar cane with rice or other short-term trees like peanut and popcorn, which are of higher productivity and higher profitability.

 

Some farmers said that they no longer planted sugar cane because of the low productivity and of the risk of sugar cane redundancy or loss of profit due to price fluctuation, which has happened in previous years. This has also resulted from the lack of cooperation among farmers. “At present, most sugar factories have not yet set up a proper investment solution on building their material sugar cane planting area. There are often “problems” in the relations between factories and farmers. According to factories, farmers breach contracts while factories are rejected by farmers for their low sugar reservation. Factories cannot buy off all the material in the low season; however, rush for the last sugarcanes in the high season. This situation has pushed the industry into a vicious cycle”, said the representative of the Vietnam Sugar and Sugarcane Association.

 

In practice, many reasons for the material shortage have been pointed out by experts. Slow mechanization rate, lack of good sugar cane seeding for high productivity and inequitable supportive policies for farmers are a few of the causes. Meanwhile, there is insufficiency in production, processing and harvesting. A 20 percent loss in sugar price was caused by insufficiency in sugar cane harvesting. The loss is also caused by the imbalance in the production line including imbalance in steam, electricity, water and partial material shortage. The poor processing technology has increased the amount of sugar evaporated together with water during the refinery process; the rate of sugar left in honey or sugar cane refuse is high while the cost for material and labour in the refinery process is big. Therefore, Vietnam’s sugar industry is of low competitiveness.

 

The allowance policy has mainly been built by companies so far; however, only some of them have done this. Representatives of enterprises and relevant units have recently agreed that in order to make a breakthrough in the sugar cane industry, it is required to focus on the application of new seeding and intensive cultivation for the purpose of improvement in sugar cane productivity and quality. This must be seen as a key solution to ensure the material for factories and raise the production effectiveness as well as the competitiveness of the industry. Concurrently, enterprises are required to buy sugar canes upon their sugar reservation, strictly follow the buying price and harmonize their benefit with that of farmers.

 

According to a representative of the Ministry of Agriculture and Rural Development: what factories should do now is stay together to make a plan, discuss about the investment in a material area and review the current capacity and area. Material area is needed for each factory and the long lasting fight for material must be terminated for long-term production.

 

As a veteran enterprise in the industry and having suffered the material shortage, Bien Hoa Sugar JSC, in 2009, made a focal target of inserting all their resources into material area development. Bien Hoa Sugar JSC has focused on intensive cultivation, making improvement in soil working and seeding. The company shall invest about VND20 million per hectare in application of new seeding of high productivity and high resistance to pestilent insects to introduce to farmers. They will also invite experts to the field to provide farmers with consultancy on intensive cultivation, organise field trips for farmers of medium productivity to learn from those of high productivity. Then, the company will gradually increase its output as well as income for farmers. It will also make a commitment about price stabilisation and sugar cane purchase while farmers keep the right to make decisions on to whom they will sell sugar cane. As a result, the company will burden part of the risk for farmers to encourage them to join in the development of stable material areas. Once an effective material area is built up, farmers will definitely expand their planting area. Nguyen Van Loc – General Director of Bien Hoa Sugar JSC said: “In parallel with the development of material area, the Company is now paying high attention to cutting down production cost by reducing loss in production lines and reducing power consumption by spending about VND40 billion to buy a series of new equipment and improving the current technology.

 

Experts believe that seeing the thirst for material and effort made by enterprises towards farmers, they may turn back to plant sugar canes and the planting area may sharply increase in the 2009 – 2010 crop. However, on the other hand, farmers may suffer another loss of crops if the planting area overpasses the capacity. They are worried because under the WTO commitment, Vietnam is forced to increase its imported sugar volume by 10 percent compared to the year 2008 to 70,000 tonnes in 2009. In addition, the fact that illegally imported sugar is nearly out of control, which may lead to redundancy. As a result, sugar and sugar cane may continue suffering “bitterness” if the supportive cooperation between enterprises and farmers is not strengthened and supportive policies for farmers is not timely carried out.