Sugar Semi-annual 2012

An Expert's View about Tropical and Subtropical Fruits, Sugar Cane in Thailand

Posted on: 21 Oct 2012

Sugar production is revised down to 10.2 million metric tons in MY2011/12 and will likely decline to 9.9 million metric tons in MY2012/13.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 10/1/2012 GAIN Report Number: TH2098 Thailand Sugar Semi-annual 2012 Approved By: Rey Santella Agricultural Attaché Prepared By: Ponnarong Prasertsri Agricultural Specialist Report Highlights: TH2098 – Sugar production is revised down to 10.2 million metric tons in MY2011/12 and will likely decline to 9.9 million metric tons in MY2012/13 due to lower-than-expected sugarcane production resulting from unfavorable weather conditions. Sugar consumption is also revised down to 2.5-2.6 million metric tons in anticipation of an economic slowdown in 2012 and 2013. Sugar exports in MY2011/12 are expected to reach 9.0 million metric tons raw value (MMTRV). However, MY2012/13 sugar exports are likely to slightly decline to 8.5 MMTRV due to a reduction in sugarcane production. Executive Summary: MY2011/12 and MY 2012/13 sugar production is revised down to 10.2 million metric tons and 9.9 million metric tons, respectively, due to lower-than-expected sugarcane production. Sugarcane production is lower than expected in MY2011/12 crop which is estimated at 98.4 million metric tons. MY2012/13 sugarcane production is likely to further decline to 95.0 – 96.0 million metric tons, down 3.0 percent from the previous year, due to unfavorable weather conditions particularly during the mid- season growing period. Despite the lower sugarcane production, the average extraction rate of sugarcane is expected to increase to around 104.5 kg/ton of cane in anticipation of normal rainfall during the ripening stage. Sugar consumption is also revised to 2.5 million metric tons in MY2011/12 and 2.6 million metric tons in MY2012/13 in anticipation of an economic slowdown in the second half of 2012 and in 2013. Sugar exports during January-May 2012, however, are expected to be up 37.3 percent from last year, particularly for raw sugar which account for 70.0 percent of total sugar exports due to limited export supplies from Brazil and India. Sugar exports will likely reach 9.0 million metric tons raw value (MMTRV) in MY2011/12. Meanwhile, MY2012/13 sugar exports are revised down to 8.5 MMTRV due to lower-than-expected sugar production caused by drought conditions. The Government is now considering a new soft loan program that will enable cane growers to buy harvesters and improve their production efficiency. The program is estimated to cost 3.0 billion baht ($100 million) which will be financed by the state-run Cane and Sugar Fund. The Thai Government operated a similar 2.0 billion baht ($66 million) program during the FY2010 – 2012 period. Commodities: Sugar Cane for Centrifugal Sugar, Centrifugal Author Defined: 1. Production According to the official MY2011/12 crushing report by the Office of Cane and Sugar Board (OCBD), sugarcane production is lower than expected at 98.4 million metric tons (Table 1). This resulted in a downward revision of sugar production to 10.2 million metric tons (Table 2). An estimated 0.4 million metric tons of sugarcane was used for ethanol production. The average sugarcane extraction rate increased to 104.5 kg/ton of cane, up 3.1 percent from 101.3 kg/ton of cane from the previous year, due to normal weather conditions during the ripening period. MY2012/13 sugarcane production is revised downward to 95.0 – 96.0 million metric tons, down 3.0 percent from the previous year due to a lack of rain during the stalk elongation stage. Below normal precipitation during the June-August 2012 period in the major growing areas in the north, northeast, and the central plain regions (Figure 1) will likely affect average yields which are expected to decline to11.3 tons/rai (70.7 tons/hectare). Most of the sugarcane harvest will be primarily used for sugar production and a small amount will be used for ethanol production (see TH2064 “Biofuel Annual 2012”). Sugarcane use for ethanol production will remain low as sugar prices continue to be more attractive than ethanol prices. Presently, there is only one sugarcane based ethanol plant operating in Thailand using 0.4 – 0.5 million metric tons of cane/year. MY2012/13 sugar production is expected to decline to 9.9 million metric tons, down 2.9 percent from the previous year, due to lower-than-expected sugarcane production. The sugarcane extraction rate will likely remain the same as the previous year in anticipation of normal weather conditions during the ripening stage. Four new sugar facilities that received government licenses in 2010 – 2011 are expected to start operating in MY2012/13. The number of sugar mills in Thailand will increase to 51 with a total crushing capacity of approximately 1.0 million metric tons of cane/day, compared to the previous total crushing capacity of 0.9 million metric tons of cane/day. 2. Consumption The Government has revised its economic growth downward to 5.3–5.8 percent in 2012, compared to its prior forecast of 5.5– 6.5 percent, due to the global economic slowdown in the second half of the year. As a result, MY2011/12 and 2012/13 sugar consumption is revised down to 2.5 million tons and 2.6 million tons, respectively. The economy is expected to continue slowing down to 4.7–5.7 percent in 2013. Nonetheless, in the first half of 2012, total sugar consumption increased 6.0 percent, slightly behind the expected annual growth rate of around 8.0 percent from the previous forecast. The lower consumption is due to lower-than-expected sugar demand by food manufacturers which account for around 12.0 percent of total sugar consumption. Food manufacturers’ demand for sugar declined around 6.0 percent in the first half of 2012. On the other hand, household sugar consumption, which accounts for 50-60 percent of total sugar consumption, increased 10.4 percent from the previous year. 3. Trade During January-May 2012, Thai sugar exports increased significantly to 4.5 MMTRV, up 37.3 percent from the same period last year (Table 4) due to an increase in planted acreage and smaller sugar exports from Brazil and India. Raw sugar exports, which account for around 70.0 percent of total sugar exports, increased 47.7 percent from last year (Table 5), particularly to China, Indonesia, Malaysia, Taiwan, and South Korea. Thailand filled its FY2012 U.S. sugar tariff-rate quota (TRQ) of 15,027 metric tons raw value (MTRV) in April and additional allocations of 7,834 MTRV in July. In addition, Thailand’s white and refined sugar exports increased to 1.3 MMTRV during January–May 2012, up 16.3 percent from last year, particularly to Cambodia, China, Laos, and Malaysia (Table 6). MY2011/12 sugar exports will likely increase to 9.0 MMTRV, unchanged from the previous forecast. White and refined sugar exports will likely increase approximately 20.0 percent to 3.0 MMTRV in MY2011/12. MY2012/13 sugar exports are revised downward to 8.5 MMTRV, down 5-6 percent from the previous year, due to an anticipated smaller sugarcane crop. Raw sugar exports are also expected to decline 8.0 percent from the previous year. Thailand is expected to fill its FY2013 (October 1, 2012 – September 30, 2013) U.S. sugar TRQ of 15,027 MTRV. MY2011/12 and MY2012/13 sugar imports are revised down to marginal levels of around 5,000 MTRV due to sufficient domestic supplies and an economic slowdown. Thailand subjects imported sugar to a 65 percent tariff rate and a quota of 13,760 metric tons. The out-of-quota tariff is 94 percent. 4. Stocks Sugar stocks will likely decline to 1.7 million metric tons in MY2011/12 and further decline to 0.6 million metric tons in MY2013/13 due to an increase in sugar exports and a reduction in sugarcane production. 5. Policy The Government still maintains its sugar policy which set prices at 19 baht/kg ($29 cent/lb) for refined sugar, ex factory wholesale (excluding 7 percent value added tax). Retail sugar prices (including the value-added tax) are set at 21.85 baht/kg ($33 cent/lb) for white sugar and 22.85 baht/kg ($35 cent/lb) for refined sugar (Table 9). The Government uses the value-added tax revenues to repay the Bank for Agriculture and Agricultural Cooperative (BAAC) for cost incurred by the state-run Cane and Sugar Fund which funds the price support program and the direct payment program. The Government has not yet finalized the MY2012/13 sugarcane support prices which are expected to be above 1,000 baht/ton. The Government completed its three-year soft loan program with the BAAC (FY2010 – 2012) which enabled cane growers to buy harvesters and improve their production efficiency. The program provided approximately 2.0 billion baht ($66 million) in loans to cane growers. Most of the loans were used to purchase new and used cane harvesters mainly from the US and Australia. The Thai Government is considering a new soft loan program of 3.0 billion baht ($100 million) funded by the Cane and Sugar Fund which will continue to allow cane growers to buy harvesters. Thai sugarcane growers see the program as essential to their future, especially as four new sugar facilities will come online and increase milling capacity from 0.9 million tons of cane/day to 1.0 million tons of cane/day starting in MY2012/13. To assist sugar farmers in the former mining area of Tak (northern Thailand), the Thai Cabinet approved a 78 million baht ($2.5 million) subsidy program that provides cane growers 200 baht/ton ($6.5/MT) to produce sugar for ethanol production. The program is intended to help cane growers an in area that is unsuitable for the production of edible crops due to the pollution and environmental damage in the region. Sugarcane growers farming approximately 47,000 rai (7,520 hectares) are expected to benefit from the program. Appendix Tables End of report
Posted: 21 October 2012

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