According to the Journal of Finance
Sugar: An important role for the country
History has proven, sugar has an essential role in the economy of each country. Sugar cane was born 2,400 years ago, used to be a luxury food in Europe, until the 19th century began to be popular around the world. Sugar makes enormous socio-economic changes when participating deeply in the food industries (confectionery, beverages, coffee, cereals …) and pharmaceuticals (excipients, syrups … ).
The sweetness of sugar creates a delicious and pleasant feeling for the user. In terms of consumption, in 2018, on average, each person in the world used 22.6 kg of sugar per year. The countries consuming the most are Israel (63.8kg), Malaysia (58.2kg), Singapore (46.9kg), Thailand (43.2kg), America (31.1kg) …
Vietnam is in the group of low consumption, but has steadily increased over the years, from 13.8 kg / person in 2012 to 15.9 kg in 2018. For longer control, sugar consumption has increased at a rate of 24%, from 0.64 million tons / year in the 1994-1998 period to 1.6 million tons / year in the 2013-2018 period. According to the Organization for Economic Cooperation and Development (OECD), our domestic sugar consumption will increase to 1.8 million tons by 2023.
In terms of production, there are 120 countries producing 180 million tons of sugar per year. Sugar cane continues to account for 2/3 of the world’s sugar supply. On the world map, Vietnam sugarcane has a certain position, ranking 14th in terms of sugarcane growing area and output, Bakertilly A&C report in 2018. However, in recent years, Vietnam’s sugar industry has been continuously under attack from cheap smuggled sugar. In the 2017-2018 crop year, smuggled sugar is estimated to account for more than 33% of the national sugar market share.
Earlier this year, adding the ASEAN Trade in Goods Agreement (ATIGA) took effect, making the “market share pie” the sugar industry torn. The fall in sugar prices dragged down the buying price of sugarcane. Farmers left sugarcane, causing the material area to narrow, affecting the entire domestic sugar production line.
Trade defense tax: An urgent solution
Sugar is on the list of 21 anti-dumping and anti-subsidy investigations initiated by the Ministry of Industry and Trade.
Not only ensuring national food security, sugarcane also provides livelihoods for over 35,000 farming households. At the same time, creating jobs for 150 thousand workers in sugar factories nationwide. With 270,000 hectares of sugarcane growing, in the 2018-2019 crop, Vietnam produced 1.2 million tons of sugar. But this year, cheap foreign sugar has pulled Vietnam’s sugarcane production in the 2019-2020 crop year by nearly 35%, down to less than 800,000 tons.
Vietnam’s sugarcane growing capacity is inherently superior to that of many other countries. If the world average yield is 70-75 tons / ha, then Vietnam has many farmer clubs growing 100 tons of sugarcane per hectare with sugar over 11 CCS in Thanh Hoa, Gia Lai …
Sugarcane productivity in many regions of Vietnam is 1.5 times higher than the world average yield.
The drought earlier this year affected sugarcane fields in many countries, reducing Thailand’s productivity to 44 tons of sugarcane / ha, while Vietnam still harvested an average of 53 tons / ha. This shows that, under the same drought tolerance, the domestic sugar industry is confident in its competitiveness if brought on equal terms.
However, the Thai government as of June 30 has financed the Thai sugar industry 10 billion Baht, equivalent to 317 million USD after the deadline. This enables Thai sugar to lower costs, even considered dumping across the region and globally. The paradox exists that the selling price of sugar imported into Vietnam is lower than the buying price of sugar in Thailand.
Data from the Office of the Sugarcane Council of Thailand (OCSB) exposed Thailand is exporting raw and refined sugar to Vietnam with an average price of only 334 USD / ton. This level is not only “half” cheap price of 755 USD / ton in the domestic market of Thailand, but also lower than the cost of buying sugar 410 USD / ton to make sugar.
In response to this incident, the Prime Minister stepped in to request the Ministry of Industry and Trade to apply safeguards in accordance with Vietnamese law and international practices to protect domestic sugar production.
Documents and evidence were submitted to the Ministry of Industry and Trade in June 2020, shortly after the data of Thai sugar landing in Vietnam in the first 5 months of 2020 showed a sudden increase, up to 500,000 tons. 10 times over the same period last year.
Trade defense tax is an urgent solution for farmers to continue sticking with sugarcane. Through two consecutive cases of serious lack of raw materials, factories are trying to find new land funds to develop sugarcane. But this is not easy, businesses are difficult to persuade farmers, because the fall in sugar prices is leading to a sharp decline in the purchasing price of sugar cane.
Currently, the pre-tax price of RS sugar is only 9,800 VND / kg (down 2,200 VND / kg), sugar RE is only 11,000 VND / kg (down 2,300 VND / kg) compared to the previous season. Sugarcane purchasing prices are also affected, down from 900 VND to 750 VND / kg of 10-word sugar cane.
The problem is being raised, if the raw material areas continue to decrease due to farmers giving up sugarcane, the sugar industry in Vietnam will soon lose its foothold from domestic to foreign playgrounds. Vietnam will have to depend on other countries, which will not ensure sustainable national food security and indirectly threaten many other food related industries.
