Suspending Sugar Import to Boost Domestic Sales

According to the Vietnam Sugar Association, the volume of illegally imported sugar amounted to 450,000 tonnes from the start of the year to date. Sugar oversupply has soared to 330,000 - 350,000 tonnes (including inventories of sugar producers). Prices of illegally imported sugar are around VND8,000 per kilo while domestic sugar is being sold at roughly VND11,000 per kilo in southern provinces. As a matter of fact, local companies face numerous difficulties in selling their products.

 

Mr Le Van Tam, Chairman of Vietnam Sugar Association, said sugar producers confront difficulties in capital and interest rates. Although these are currently general snags of all companies, paying very high borrowing rates for preserving excessive inventories is becoming a pressure and a burden for sugar companies.

 

Mr Tam also pointed out shortcomings in signing long-term sales contracts between sugar producers and food companies and traders. When sugar prices tend to go up, sugar producers hold the advantage. When supply is relatively stable and prices tend to go down, buyers opt for spot contracts, leading to inventory heaping at sugar companies. Furthermore, with competitive prices, Thai sugar is sending Vietnamese products to disadvantageous position as sugarcane crop in Thailand coincides with Vietnam.

 

On contrary to the proposal submitted by the Vietnam Sugar Association, the Ministry of Industry and Trade corroborated that the total sugar output in this sugarcane crop was about 1.1 million tonnes, well below the estimated demand of 1.4 million tonnes in the country in 2010. The ministry confirmed that its granting of quotas for importation of 250,000 tonnes of sugar is appropriate to the demand.

 

Mr Nguyen Thanh Bien, Deputy Minister of Industry and Trade, said: Companies imported 53,000 tonnes in the first four months out of 250,000 tonnes allowed in 2011, down 21 percent from the January - April period of 2010. Given this result, imported sugar is not large enough and does not leave negative impacts on domestic production and sales.

 

Mr Bien said the volume of stockpiled sugar as of April 15 was 525,000 tonnes, not a large volume for a seasonal industry like sugar industry (which produces in seasons but sells throughout the year). This source will meet the market demand in the next 5-6 months.

 

According to the Ministry of Agriculture and Rural Development, domestic sugar sales in the first four months of 2011 increased more than 80,000 tonnes from the same period in 2010. Current prices of sugar ensure profits for both sugar growers and processors.

 

The deputy minister analysed that this year Vietnam enjoys a good crop, farmers made profit and a slide in domestic sugar price is corresponding to the overall market trend. This is a good sign in the event that Vietnam is struggling to deal with rising inflation. In the past two years, global sugar prices leaped continuously, forcing Vietnamese consumers to pay higher for the sweet commodity.

 

To ensure the balance of supply and demand and encourage domestic sugar sale at competitive price, the Ministry of Industry and Trade, the Ministry of Agriculture and Rural Development and the Ministry of Finance will coordinate in applying a set of measures like rescheduling delivery of imported sugar until July.

 

For unpaid contracts signed for the delivery prior to June 30, 2011, importers will halt the importation in case they do not have to pay for the breach of contracts. They will be not allowed to sign new contracts. For companies using sugar as an input, the ministries will apply measures to encourage them use domestic sugar. They will also consider the resumption of import at a proper time.