Sugar prices could float by October

Sugar prices could float by October

Local sugar prices will likely be floated in October, or April next year at the latest, in line with the restructuring plan for the industry.

At present, the Cane and Sugar Board under the Industry Ministry sets the ex-factory price of white sugar while the Commerce Ministry sets the retail price, now at 24.50 baht a kilogramme.

Thailand has long fixed retail prices above market rates to ensure profits for farmers. The domestic retail price is higher than it should be based on global comparisons, although the gap has narrowed considerably from about five baht per kg two years ago.

Somsak Jantararoungtong, secretary-general of the Office of the Cane and Sugar Board, told Manager Online that the change would take effect after the Cane and Sugar Fund repays all the debts it owes to the Bank for Agriculture and Agricultural Cooperatives.

"The price float will come at the same time as the lifting of the quota system. This is the right time to do so because world prices are at levels on par with local prices," he said.

A clear plan is expected to be ready in February. Two approaches are being considered: allowing the price to be dictated by world prices, or setting  floor and ceiling prices. The latter, however, is difficult to implement, he added.

Thailand's cane sugar output for the 2016-17 crop year is expected to fall by 3.2% because of widespread drought conditions last year.

The cane harvest is forecast at 91 million tonnes in 2016-17, down from 94.05 million in 2015-16, Mr Somsak told Reuters in early October.

"That should translate to around 9.3 to 9.4 million tonnes of refined sugar, compared to 9.6 to 9.7 million tonnes in 2016," said Mr Somsak.

In March, the country slashed its forecast for 2016 sugar exports to 7.1 million tonnes from an earlier estimate of 11 million.

Stockpiles in India, the world's third biggest exporter, will fall to 23.3 million tonnes next year, the lowest in over a decade, as consumption outstrips supply, the Indian Sugar Mills Association said in July. 

Thailand is the world's second-largest sugar exporter by value after Brazil.

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