Sugar Industry: Still in Hardship

According to Vietnam Sugarcane and Sugar Association, there is no shortage of sugar supply for the domestic market at the moment and it proposes that state administrative agents stop importing sugar in order to protect the domestic market. However, many domestic sugar factories with large production volume raise product prices on their own initiative. For instance, a pack of RS witnesses an increase of VND2,000 – 3,000 per kilogram, going up to VND21,500 – 22,000; RE fluctuates between VND24,000 and 26,000 per kilogram, which is approximately equivalent to the prices during last year’s fever. Such unreasonable increases will stir up the prices of the basic goods basket, particularly given the context of the Government firmly directing enterprises, ministries and ministerial-level agents to implement Resolution 11 to stabilize the market and control inflation. On the other hand, these increases also exert negative impact on CPI of July which is forecasted at 17 percent.

 

Representatives of some domestic sugar factories explain that recent increase in sugar prices is due to huge demand for bakery production for Mid-August festival and Lunar New Year. The amount of sugar consumption in July, therefore, increases significantly against previous months. This also pushes sugar prices up. A calculation of Vietnam Sugarcane and Sugar Association reveals that quarter 3 and the remaining months of the year will see 20,000 – 30,000 tonnes higher than the average consumption amount of 90,000 – 95,000 tonnes. Almost all sugar factories with large production capacity take advantage of this occasion to adjust the sugar volume, as well as raise selling prices according to consumers’ demand.

 

Many bakery manufacturing and trading factories also express their concern when facing high increases in sugar prices. According to Hai Ha Kotobuki’s representative, the company was granted a quota of 500 tonnes of sugar. However, sugar prices in global market are volatile. In April and May when global prices witnessed big decreases, down to VND15,000 – 16,000 per kilogram, Vietnamese administrative agents directed to postpone imports. Imported sugar is calculated to be worth VND22,000 – 23,000 per kilogram. Bakery companies will find it hard to operate their production and business at this price platform since delivery cost of products will accordingly be boosted.

 

Lack of development strategy

As assessed by the Ministry of Agriculture and Rural Development, the 2010 – 2011 crop shows the strengths and weaknesses of the sugar industry. Factories are aware of making investment in production lines and labour force to improve sugar productivity. Their products are not only sugar, but include new energy sources such as power and biofuels. The period in which sugar industry revolved around a volume of 1 million tonnes of sugar per annum is over. However, in agricultural structure, sugarcane is subject to competition from other plants, which leads to a reduction in the farming area of sugarcane. According to the Ministry of Agriculture and Rural Development, the area for sugarcane planting across the nation is 271,400 hectares in the 2010 – 2011 crop, up by 6,300 hectares against the previous crop, but still failing to reach the target area of 300,000 hectares. Experts also warn about fluctuations in Vietnam’s sugarcane and sugar productivity. While no growth was witnessed in the productivity, this year the industry sees an acceleration of 60.5 tonnes of sugar per hectare of sugarcane. However, what is more important is the fact that Vietnam’s sugar reserve is too low, especially in the Mekong Delta River.

 

To have sustainable and long-term sugar industry development, experts point out that it is necessary for a country to have its own seed sugarcane system. Vietnam’s agriculture has not had any actual seed sugarcane system. Despite increases in yield, such increases are still low compared to global standard. On the other hand, in the development strategy for the sugarcane and sugar industry, it is also vital to take transport distance into consideration, to shorten the time it takes to transport sugarcane from fields to factories. This is an important development approach to improve sugar quality, since if sugarcanes are not processed within 24 hours of being harvested, sugar reserves will be damaged badly. As judged by experts, damage in sugar reserves after being harvested in Vietnam fluctuates between 10 and 30 percentage. Unless the above issues are tackled, it is impossible for Vietnam sugarcane and sugar industry to have a sustainable development strategy in the future.