Vietnam to Face Sugar Shortage without Export Controls

According to the forecast of the Ministry of Agriculture and Rural Development (MARD), in the sugarcane season 2011 - 2012, sugarcane factory has milled 14.6 tonnes of sugarcane and produced 1.31 tonnes of sugar. Pursuing Vietnam Sugar and Sugarcane Association, produced sugar accounted for 1.35 million tonnes. Practically, it is the highest result ever reached. Especially, production has surpassed domestic demand (about 1.3 million tonnes).

 

Apart from current sugar production, there is also 100,000 tonnes of sugar in inventory from last year. In case of summing up 70,000 tonnes of sugar must be imported relying on WTO commitments, domestic supply will reveal 1.52 million tonnes. This result does not include tens of thousands of sugar illegally imported from Thailand to South West border of Vietnam. It is known that in this year, Thailand production amounts quite high and one million tonnes higher than that last year. Thailand necessarily exports seven million tonnes. With clearly lower price than Vietnamese sugar, Thailand sugar illegally imported in Vietnam is undeniable. Regarding Vietnam Sugar and Sugarcane Association, there is about 500 - 1,000 million tonnes of sugar illegally imported in Vietnam everyday. With 1.52 million tonnes of domestic sugar and tens of thousands of tonnes of sugar illegally imported in Vietnam, so out of 1.3 million tonnes for domestic demand, over 200,000 tonnes of sugar will be redundant.

 

Meanwhile, because of high inflation and tighten monetary policy, purchasing power has strongly decreased, demand for sugar products, such as candy, soft drink has substantially declined. This situation is described by high level of inventory for these products. Thus, actual demand will not be as big as previous years.

 

In accordance with the comparison between supply and demand for sugar this year, it is hard to say that there will be a shortage of sugar this year. Meanwhile, at the end of April 2012, sugar inventory in factories will reach 355,000 tonnes. Produced sugar till the end of this season will account for 195,000 tonnes. If including 70,000 tonnes of sugar imported by WTO commitments, there will be 620,000 tonnes of sugar. This amount will cover demand needs of 100,000 - 120,000 tonnes of sugar monthly at the end of September. Since October, a new sugarcane season will start. Therefore, shortage of sugar hardly happens this year.

 

Although specific data has demonstrated a relatively stable domestic sugar market, but there may be a gap if the supply and demand balance is changed. The reason is export.

 

Earlier this year, due to slower domestic sugar consumption, enormous competition for Thailand illegally imported sugar, pressure on paying interest of bank’s loan... many sugar export enterprises suppose to export sugar. Practically, even though the Ministry of Industry and Trade (MOIT) is wondering to give permission to sugar export, many enterprises exported 132,000 tonnes of sugar (till the end of April). Vietnam Sugar and Sugarcane Association estimates exported sugar of 200,000 tonnes. If this exported sugar amount just stops there, the supply - demand balance is not much influenced. But if enterprises still hurdle in exporting sugar, domestic supply may be deficient. This enterprises activity is very common. Previously, the Association informed that domestic sugar lose the competition with illegally imported Thailand sugar and can not find the buyers, but in the next month, the Association stated that it need to import sugar because enterprises of the Association exported over 100,000 tonnes of sugar to China. This repeated story suggests that if sugar export is not under controlled, domestic sugar may be in shortage at the season’s end.

 

According to the Import - Export Department, the problem is not to permit or stop sugar export, but the right forecast aiming to carry out reasonable decisions is the most important thing. In the unreasonable decisions, deficient or redundant situations may happen, and it may have large influence to the market. One of the solutions is that sugar industry needs to carry out the sugar management module, which is efficient to harmonise interests of farmers, consumers and enterprises.