Sugar stockpile proves bitter harvest

Sugar producers are bemoaning cheaper smuggled sugar imports from Cambodia for the sector’s massive stockpiles

According to Vietnam Sugar and Sugarcane Association (VSSA), Vietnam produced an estimated 300,000 tonnes of sugar in March, while Vietnam’s sugar inventory is likely to hit 500,000 tonnes by the end of the month.

The association’s general secretary Nguyen Hai said the sugar inventory in the first months of this year had already topped last year’s 300,000 tonnes. Hai told VIR that local sugar firms were struggling and Long My Phat and the Hau Giang Sugar Company had already shut two plants.

“Other plants in Ben Tre, Tra Vinh, Soc Trang and Hiep Hoa have been operating at only moderate levels,” he added.

He said high inventories were the by-product of slow demand and illegally imported sugar from Thailand via Cambodia, which currently accounts for 70-80 per cent market share in the Mekong Delta. He also worried that high inventories would force sugarcane prices down, leaving farmers to suffer.

According to domestic sugar firms, they now suffer losses of over VND1,000 for every kilo they sell. Despite incurring losses, firms cannot lower the price of the sugarcane they buy from local farmers.

The black market in sugar had also damaged tax coffers and unfairly penalised Vietnamese sugar firms, said Nguyen Ba Chu, general director of Bourbon Tay Ninh Corporation, Vietnam’s biggest listed sugar company. 

“While smuggled sugar has no tax, sugar producers in Vietnam have to pay 15 per cent tax including 5 per cent value added tax and 10 per cent corporate income tax. Vietnamese sugarcane costs from $45-$50 per tonne, while in Thailand, India and Cambodia it is only $35-$38 per tonne,” Chu explained

The price of sugar has continuously dropped, sinking to around VND13,000 per kilo wholesale and VND 18,000-VND21,000 a kilo retail while illegally imported sugar costs just VND11,000-VND12,000.

 “Vietnam’s sugar prices are the highest in the world,” Chu said. “However, it is hard to cut as the price is directly related to the life of the sugarcane growers.”

However, general director of Khanh Hoa Sugar Joint Stock Company Do Thanh Liem, who declined to release its inventory, said that in fact the domestic sugar price was out of step with the rest of the region and smuggled imports were hurting the domestic industry.

Last year the Hanoi Stock Exchange-listed Khanh Hoa Sugar Joint Stock Company’s after-tax profits plummeted 67 per cent to VND 39 billion ($1.85 million).

Other listed sugar firms that shared a gloomy year on the markets included Kon Tum Sugar Joint Stock Company and Gia Lai Sugar-Thermal Power Company.

VSAA also estimated that every year, Vietnam was missing out on VND500 billion ($23.8 million) in tax from smuggled sugar.

The Ministry of Industry and Trade earlier this year set a 77,200  tonne annual limit on imported sugar.