World sugar prices plummeted with crude oil prices
Sugar prices in April decreased sharply compared to the beginning of the year due to the impact of falling crude oil prices. According to Trading Economics, as of April 27, sugar price plunged by 31.3% compared to the beginning of the year to just under US $ 10 / pound.
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| Price movements from the beginning of December 2019 to April 27, 2020. Source: Trading Economics |
Talking to the writer, Mr. Nguyen Van Loc, General Secretary of Vietnam Sugar Association, said crude oil prices often dominate greatly with sugar prices.
“The unprecedented decline in crude oil prices has caused Brazil, the world's largest sugar exporter, to use a part of its sugar cane to produce ethanol and now switch to sugar production. They use crude oil to make gasoline instead of ethanol because of its cheap cost. This leads to the excess sugar, which is now bigger, ”Mr. Loc said.
On April 20, WTI oil price experienced an unprecedented session in history when it plunged down to -37 USD / barrel.
According to Reuters, the two biggest oil and gas corporations in Brazil in early April reduced ethanol purchases from domestic producers.
Accordingly, BR Distribuidora said it reduced its ethanol purchase to below the contracted minimum. Raizen Combustiveis SA also announced that it would not be able to buy ethanol in volumes as previously signed and would adjust purchases in the coming months.
Ethanol accounts for about 40% of Brazil's total fuel consumption in 2019.
Earlier, at the beginning of the year, the sugar price was at US $ 15.24 / pound, 20% higher than the beginning of 2019, thanks to Thailand and India's sugar output is forecast to decrease due to The impact of extreme heat weather.
According to the Bangkok Post, Thailand is experiencing the most severe drought in the past 4 years and sugarcane production has decreased significantly. The country is currently the fourth largest sugar producer and the second largest exporter in the world, after Brazil.
It is estimated that Thailand's sugarcane production in the 2019-2020 season will be only 80 million tons, down by nearly 40% compared to the 2018-2019 crop year. It is expected that this year's sugar output will be only about 9 million tons, of which domestic consumption is 3 million tons and exports 6 million tons.
Meanwhile, in the previous crop, Thailand produced nearly 14.6 million tons of sugar, and the remaining domestic consumption of 2.6 million tons was used for export.
In India, according to the newspaper Business Today, this country's sugar output as of April 15 decreased by 20% compared to the same period last year to 24.7 million tons. Previously, in November 2019, sugar production fell sharply by 64% due to the impact of heavy rains and floods, damaging sugarcane fields.
Mr. Loc said, although the price of sugar has increased early, but the oil price reduction has erased all previous gains. “The price of sugar only increased for a while, then it returned to the 10-year low,” Mr. Loc said.
Vietnam's sugar industry has suffered double losses
Pressure on prices also many Vietnam sugar factories have to close. According to the Vietnam Sugar Association, there are currently only 28 factories operating compared to 41 in 2017.
The period of production to March 31 went gradually towards the end of the crop, until the end of the month, only 8 sugarcane crushing factories (excluding raw sugar refining plants) continued to produce in 28 sugar factories operating in crop 2019 – 202020. A number of other factories ended the month because of running out of material.
Not only affected by plummeting world sugar prices, Vietnam's sugar industry is also greatly affected by smuggled sugar and the COVID-19 epidemic makes consumption difficult.
Mr. Loc said that due to the impact of COVID-19 epidemic, Vietnam implemented a social gap, closed schools, restaurants, cafes, factories and festivals, resulting in reduced sugar consumption.
In addition, sugar produced from domestic sugarcane cannot compete in price compared to imported sugar (according to ATIGA) and Thai smuggled sugar, the price of official sugar and smuggled sugar in the market is lower than that of domestically produced sugar and decreased from the previous month, currently stands at about VND 12,200 / kg in Ho Chi Minh City, from VND 12,000 – 12,100 / kg in Hanoi and the Central.
In the month, the amount of smuggled sugar decreased because the border was tightly controlled because of the COVID-19 epidemic, dominating the market as official import sugar. Imported sugar has lowered the price of sugar produced from domestic sugarcane to below production cost, so it is almost impossible to sell.
According to the Vietnam Sugar Association, compared with regional prices including ASEAN countries and China, Vietnam's sugar price is still at the lowest level.
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| Source: Vietnam Sugar Association |
Despite difficulties, many businesses still increase sugarcane purchasing price to 800,000 – 850,000 VND / ton, in some places even 950,000 VND / ton in order to encourage people to keep sugarcane for the next crop.
However, this has led to higher production costs. It is estimated that the average cost of producing 1 kg of white sugar of Vietnam's sugar industry in the 2019-2020 season will increase by VND 1,000-2,000 / kg compared to the beginning of the crop.
According to economy and economy
