Sugar prices start to dissolve

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A kilogramme of refined sugar is currently retailed at VND17,500-18,000 ($0.84-$0.87), down VND1,000 compared to early March and VND500 more than that of illegally imported sugar, according to Ministry of Agriculture and Rural Development (MARD).

“The price of most goods in the domestic market is up except that of sugar. That is because the market is overwhelmed with illegally imported sugar products which shirk value added tax and import duty payment,” said Vietnam Sugar and Sugarcane Association general secretary Ha Huu Phai.

In such instances, local sugar factories had to sell products at lower prices to remain competitive.

It was said that most of the sugar sold by sugar factories was produced in 2010 when businesses incurred high material costs. Therefore, with current retail prices of above VND17,000 per kg businesses claimed they almost run out of profits.

Another reason propelled businesses to pull down their product prices was that many sugar firms are short of capital to buy in material while bank lending rates remain high.

Local sugar factories needed up to VND1 trillion ($48.3 million) to buy in sugarcane for production in April 2011, but many of them found hard to source bank loans, Phai said.

The director of a sugar factory said his firm would need VND2-5 billion ($96,000-$240,000) per day in peak harvest season to buy in material for production but it could not source bank loans.

He said his firm loaned around VND100 billion ($483,000) a year for material procurement, around 30 per cent of its actual demand.

Chairman and general director of Can Tho Sugar Joint Stock Company Nguyen Thanh Long ascribed the poor sense to state authorities’ incorrect forecast about local sugar production.

He argued that Vietnam could produce 1.1 million tonnes of sugar in the 2010-2011 sugar crop reason, some 170,000-200,000 more than Ministry of Industry and Trade’s (MoIT) initial forecast. Long assumed that with import quotas of 250,000 tonnes MoIT had ratified in early 2011 the domestic market will see a surplus of around 80,000 tonnes in 2011.

According to MoIT’s Import Export Department statistics, Vietnam imported 29,000 tonnes of sugar in the first quarter of 2011, down 2,000 tonnes against the corresponding period in 2010.

“The dilemma of local sugar factories came from their huge stockpile and banks’ high lending rate, but not from imported sugar as the imported volume was still lower than that a year ago,” said deputy minister of Agriculture and Rural Development Diep Kinh Tan.

The inter-ministries of Agriculture and Rural Development, Finance, Industry and Trade would submit some remedies to the prime minister to help the sugar industry run smoothly, Tan said.