Oversupply but No Price Reduction

The Vietnamese Ministry of Agriculture and Rural Development said the country had only eight sugar plants in operation in the central region and Central Highlands at the end of April 2011. They processed 11.3 million tonnes of sugarcane to turn out 1.03 million tonnes of refined sugar, an increase of 163,200 tonnes from the same period last year. But, they had up to 500,000 tonnes in stockpile because imported sugar was also sold in the country. Therefore, if companies import the remaining 250,000 tonnes as quotas granted by the Ministry of Industry and Trade at the start of the year, foreign sugar will “crush” the domestic product.

 

Nonetheless, the Ministry of Industry and Trade corroborated that the total sugar output in this sugarcane crop was about 1.1 million tonnes, an increase of 200,000 tonnes from the previous crop. However, given the local demand for sugar, the country is still facing a shortage of 200,000 tonnes. Meanwhile, local companies imported just 29,000 tonnes during the first three months of this year, a decrease of 2,000 tonnes from the same period last year. The ministry noted that the demand for sugar will rise in July and August, when confectioneries use more sugar to make moon-cakes for the Mid-autumn Festival. Hence, a shortage may happen at that time.

 

At a meeting between the two ministries on this matter, Mr Nguyen Loc An, Deputy Director of the Domestic Market Department (the Ministry of Industry and Trade), said companies have imported only 4,000 tonnes of sugar, a too small a volume to affect the sales of domestic sugar as local factories have complained.

 

The amount of 500,000 tonnes of sugar in stock put forth by sugar producers needs to be reviewed. Therefore, the ministry will keep the sugar import quotas unchanged for this year. But, the ministry also pledged to facilitate domestic sugar refineries to boost sales. It will ask importers to reschedule delivery of sugar until July.

 

Mr Nguyen Loc An said sugar producers feared a drop in prices on global markets will drag on the domestic market while they have to pay a high interest rate of 21-22 percent per annum at bank loans. This rate is a heavy burden on them and they want to sell out their sugar, he said, adding that the alleged impacts of imported sugar on farmers are untrue.

 

Meanwhile, sugar plants have never shared profits with customers. For instance, when the price of sugar soared up to VND27,000 per kilo in 2010, they still expected the price to climb higher so they did not sign long-term contracts, but day by day, with trading companies and sugar-needing companies. This caused a hotter fever and many sugar users like food companies could not buy it at that time.

 

Even now, though sugar producers are complaining about the Government allowing the import of sugar, which has resulted in a pileup of 500,000 tonnes of domestic sugar stocks, retail prices of sugar have not fallen much. A kilo of refined sugar is now sold at VND23,000 - 24,000.

 

Meanwhile, according to the Vietnam Sugar Association, the cost price for a kilo of sugar is now only VND12,000 in the northern region and VND15,000 in the southern region. The selling price of premium refined sugar is now VND17,500 - 18,000 per kilo in the northern region. At these prices, they are making a profit.

 

He said the country consumed over 465,000 tonnes of sugar during the first four months of the year. “Indeed, the volume of sugar sold is higher than that in the same period last year. In addition, they are exporting to China,” said Mr Nguyen Loc An. Thus it is groundless for sugar producers to complain that they have a burden of sugar stocks.

 

SGGP