Thailand urged to beef up sugar exp

Thailand urged to beef up sugar exports to Asean
13/06/2012
Nanchanok Wongsamuth

Thailand is being urged to increase sugar exports to Asean members to capitalise on regional economic integration, as supply from Brazil is expected to dwindle on lower price prospects, low margins and poor cash flow over the next two years.

"While greater integration within Asean will create new trade opportunities for regional producers, it will also create a more competitive environment in some markets that are currently protected, potentially threatening the more high-cost producers," said Gareth Forber of LMC International's sugar research team.

There is an opportunity for Thailand to divert a greater proportion of sugar exports to Asean if exports from Brazil slow down. But it has to offer the quality of sugar demanded.

Most Asean countries plan to reduce tariffs on sugar to low levels or zero to 5% by either 2015 or 2018. From 2009-11,fellow Asean members received 44% of Thailand's sugar exports on average.

The country's cane output for the 2011-12 season totalled 97.98 million tonnes, yielding 10.2 million tonnes of sugar.

Exports may total 7.8 million tonnes this year.

The two largest importers - Indonesia and Malaysia - source sugar from Australia in addition to Brazil.

Some 3 million tonnes enter Asean from outside the region each year, with Brazil accounting for 1.5 to 2 million tonnes.

Mr Forber said slowing growth in Brazilian sugar exports would suggest the product is being sold closer to home, creating more opportunities for Thailand to supply a greater proportion to Indonesia and Malaysia, supported by improved sugar quality.

Sugar millers in Thailand have pledged to produce a very high polarisation of 99.2 degrees from the 2012-13 crop year.

At present, Thai raw sugar for export has a polarisation of 96 to 97.99 degrees for shipment to Japan and a minimum of 98.5 degrees for other destinations.

Over the last couple of years, Thailand's quality has been improving, and there's no reason why the trend [of increased exports to the region] won't continue," said Mr Forber.

Malaysia levies zero duty on raw sugar imports, while Indonesia charges US$60 a tonne, implying a tariffpreference for Thailand starting in 2015.

"However, history shows that governments will do what they can to try to push the deadline out, which would pose a challenge for Brazil," said Mr Forber.

Michael Whitehead, ANZ Bank's agribusiness director, said Thailand's sugar sector provides an example to other countries of how to tackle challenges, while there is also "a passion in the industry to make sure nothing holds it back."

He said the sector has studied ways to float sugar prices, which shows Thailand engages in "refreshing discussions" on the issue unlike other countries.

(Source: Bangkok Post, Economics, COMMODITIES, Thailand urged to beef up sugar exports to Asean, 13/06/2012, Nanchanok Wongsamuth, link)