Price controls complicate Thai sugar outlook

Price controls complicate Thai sugar outlook

Millers' group says regulatory change could make it harder to meet export commitments

A farmer repairs an irrigation pipe in a sugar cane field in Nong Nok Kaeo, Kanchanaburi. Local sugar output is forecast to drop by almost a fifth in the coming harvest season due to the impact of a severe drought. (Photo: Bloomberg)
A farmer repairs an irrigation pipe in a sugar cane field in Nong Nok Kaeo, Kanchanaburi. Local sugar output is forecast to drop by almost a fifth in the coming harvest season due to the impact of a severe drought. (Photo: Bloomberg)

Prospects for Thailand’s sugar crop are deteriorating just as the country’s millers are struggling to come to grips with the implications of new export regulations announced this week.

Production is likely to drop to 7-8 million tonnes in 2023-24 from 11 million tonnes crushed in the previous crop, according to the Thai Sugar Millers Corp. That means exports could fall to 4-5 million tonnes next year from 7 million expected in 2023, said Rangsit Hiangrat, the group’s director.

The outlook has worsened since early September when Mr Rangsit estimated output in 2023-24 at around 9 million tonnes and exports of 6 million tonnes, compared with 8 million initially forecast for 2023. Drought has ravaged plantations and reduced the amount of cane available for crushing. Thailand is one of the world’s top three sugar exporters.

The output decline will further tighten global supply and support futures prices that are already near a 12-year high after India said that it would keep curbs on exports beyond the end of October.

Now the industry also needs to grapple with the consequences of a government decision on Tuesday to list sugar as a controlled commodity, a move aimed at ensuring domestic supplies and keeping inflation in check. The addition to the control list is effective for one year.

As with other controlled goods, this means that any retail price changes or exports of one tonne or more of sugar will need to be first cleared by a regulatory panel. Mr Rangsit said the move may cause delays in fulfilling delivery contracts for sugar already sold on the futures market.

“Exports will be affected and the industry will be hurt, including millers and cane farmers, as long as the government is slow to clear up uncertainties,” he said in an interview. “If exporting sugar becomes more difficult, it will disrupt global supply and the futures contracts we’ve already committed to.”

Meanwhile, cane growers around the country have said they would protest on Sunday against the cabinet’s move, with plans to gather and block sugar from being moved out of mills to be sold at what they called unfair prices.

The government said on Tuesday it will seek ways to supplement cane growers’ income and expects to propose a measure in a cabinet meeting in two weeks. 

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