Dump sugar price controls ahead of AEC, millers urge

“We are moving along the global and regional trend. In preparation for the AEC in 2015, we support the floating of domestic sugar prices in accordance with the global price. This means the government should abandon domestic sugar-price controls,” Cherdpong Siriwit, the new chairman of the Thai Sugar Millers Corp, said yesterday.
The three sugar mill associations have called for the price float for some time, expecting to channel gains from extra profits to research and development. The Thailand Development Research Institute, hired by the Office of the Cane and Sugar Board to study the restructuring of the industry, also favours the float.
Like the proposal of the associations, the minimum and maximum price could be set and the government would provide compensation.
Under the current price scheme, farmers fail to benefit from high global sugar prices while consumers fail to enjoy a price cut when global prices drop.
The domestic price is now pegged at Bt23 per kilogram. Sugar for May delivery on February 17 was quoted at US$626 per tonne in the London Futures Exchange, which indicates the per-kilogram price at only Bt19.
Cherdpong said that to guarantee sustainable income for cane growers, the government should allocate more budget for R&D to improve yields.
Sugar is one of the commodities that will enjoy free trade once Asean becomes a single market.
However, Thai sugar millers have said the price differences between domestic and international markets will likely lead to an increase in smuggling when international prices decline and domestic shortages when international prices go up.
Floating local sugar prices would also boost investment among private operators, which need to increase sugar-cane yield in preparation for the seamless market, the associations said.
They are ready to work with the government to find a way to increase sugar-cane production per rai, including research on new cane varieties with high sucrose and pest-resistant qualities.
“Increasing yields is a measure that consumes time and investment. I believe sugar mills and cane growers should jointly advocate this policy with the government and other agencies for the industry’s long-term benefit,” Cherdpong said.
Thailand is now the world’s second-biggest sugar exporter.
The Thai sugar industry has maintained its strength so far, but improvement is necessary to meet new challenges, he added.