Required Report - public distribution

**Date:** 9/30/2005

**GAIN Report Number:** TH5099

TH0000

**Thailand**

**Sugar**

**Semi-Annual**

**2005**

**Approved by:**

Russ Nicely, Acting Agricultural ![](media/image1.wmf)Counselor

U.S. Embassy, Bangkok

**Prepared by:**

Ponnarong Prasertsri, Agricultural Specialist

**Report Highlights:**

MY 2006 sugarcane production is revised downward in response to drier
weather conditions. The contraction for the third consecutive year of
sugarcane production will limit the exportable supplies of sugar. The
Government will likely raise the minimum prices of sugarcane in order to
secure sugarcane and molasses supplies for ethanol production.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Semi-Annual Report

Bangkok \[TH1\]

\[TH\]

#  

[Executive Summary 3](#executive-summary)

[1. Production 4](#production)

[1.1 Sugarcane 4](#sugarcane)

[1.2 Sugar 4](#sugar)

[2. Consumption 4](#consumption)

[2.1 Sugarcane 4](#sugarcane-1)

[2.2 Sugar 4](#sugar-1)

[3. Trade 5](#trade)

[4. Stocks 5](#stocks)

[5. Policy 5](#policy)

[Statistic Tables 7](#statistic-tables)

[Table 1: Thailand's Sugarcane Production
7](#table-1-thailands-sugarcane-production)

[Table 2: Thailand's Production, Supply and Demand for Sugar
8](#table-2-thailands-production-supply-and-demand-for-sugar)

[Table 3: Thailand's Exports of Sugar
9](#table-3-thailands-exports-of-sugar)

[Table 4: Thailand's Annual Raw Sugar Exports (MTRV)
10](#table-4-thailands-annual-raw-sugar-exports-mtrv)

[Table 5: Thailand's Annual White and Refined Sugar Exports (MTRV)
11](#table-5-thailands-annual-white-and-refined-sugar-exports-mtrv)

#  

# Executive Summary

MY 2006 sugarcane production is revised downward to 40 million tons,
down significantly for the third consecutive year, due to drier weather
conditions. The drought will also dampen the extraction rate of cane for
sugar, leading to a sharp reduction in sugar production. In addition,
molasses production will likely drop significantly. Sugar exports are
expected to continue the downward trend due to limited exportable
supplies. Also, the upward pressure in prices of sugarcane and molasses
causes uncertainties in investment plans for sugarcane/molasses-based
ethanol plants. The Government is expected to reverse its sugarcane
production restriction policy set in MY 2004 by setting higher minimum
prices for MY 2006 sugarcane crop so as to secure sugarcane and molasses
supplies for ethanol production.

# 1. Production

## 1.1 Sugarcane

MY 2006 sugarcane production is expected to decline for the third
consecutive year to 40 million tons due to continued drier weather
conditions in major growing areas, particularly in the northeastern
region. Sugarcane production in the northeastern region, accounting for
about 40 percent of total planted area, will likely drop by 20 percent.
The level of rainfall is expected to be far below the 30-year average
rainfall. Most sugarcane cultivation is rain-fed, accounting for about
85 percent of total cultivated area.

## 1.2 Sugar

MY 2006 sugar production is forecast to continue the downward trend in
line with continued drop in sugarcane production resulting from drier
weather conditions. Also, the drought will likely dampen the average
extraction rate of cane for sugar to 108.2 kg/ton of cane, as compared
to 108.5 kg/ton of cane in the previous year. Also, molasses, which is a
by-product of sugar production, is expected to shrink significantly to
around 2 million tons, of which around 1 million tons are used
domestically as raw material in food and beverage industries. This will
lead to a surge in molasses prices to 3,200 baht/ton (roughly US\$
78/MT). Even at this price it is still not cost effective to use
molasses for ethanol production, given the fixed domestic ethanol price
at 12.75 baht/liter (roughly U.S.\$ 33 cents/liter).

![](media/image2.wmf){width="5.013194444444444in"
height="2.171527777777778in"}

# 2. Consumption

## 2.1 Sugarcane

Despite the start of some sugarcane/molasses-based ethanol by the end of
2005, all sugarcane is still used for sugar production due to
drought-limited sugarcane supplies. The current market price of
sugarcane is at around 1,000 baht/ton (roughly U.S.\$ 24/MT).

## 2.2 Sugar

MY 2006 sugar consumption is expected to continue the upward trend both
in household and industrial use in line with the country's economic
expansion. The current domestic prices for sugar remain unchanged at
11.77 baht/kg. (roughly U.S.\$ 13 cents/lb) wholesale, and 13.25
baht/kg. (roughly U.S.\$ 15 cents/lb) retail, despite the political
pressure to raise domestic sugar prices by another 2 baht/kg. (roughly
U.S.\$ 2 cents/lb) in order to ease the debt burden of state-run Cane
and Sugar Fund.

# 3. Trade

MY 2006 sugar exports are revised downward to 2.7 million tons in
anticipation of limited exportable supplies, following the contraction
of domestic sugarcane production from the drier weather conditions.
Current raw sugar export prices reportedly continue to increase to
around U.S.\$ 11 cents/lb (roughly U.S.\$ 243/MT). Some regular
importers in Asian region reportedly shifted to relatively cheaper
Brazilian and Indian sugar. Thailand has already shipped all raw sugar
under MY 2005 U.S. tariff-rate quota in the amount of 14,743 metric tons
(raw value). Meanwhile, exports of raw sugar to other countries declined
significantly in the first half of 2005, as most exporters shifted to
more value-added sugar, like white and refined sugar.

Sugar imports in MY 2006 will likely be insignificant due to sufficient
available domestic supply, despite anticipated low sugarcane production.
The government import policy on sugar follows the WTO agreement, which
is limited to a 65 percent tariff rate (roughly U.S.\$ 15.95 cents/kg.)
under the quota of 13,760 tons in CY 2005. Meanwhile, the out-of-quota
tariff rate is 94 percent (roughly U.S.\$ 23.06 cents/kg.).

# 4. Stocks

MY 2006 stocks are expected to decline to record lows due to the
continued contraction in sugarcane crop.

# 5. Policy

The Government is expected to reverse its sugarcane production
restriction policy set in MY 2004 after drought hit sugarcane production
for the third consecutive year. The MY 2006 minimum prices for sugarcane
will likely be set higher at 820 baht/ton (roughly U.S.\$ 20/MT,
ex-factory prices) in order to encourage farmers to continue their
sugarcane crop, and to secure sugarcane/molasses supplies for ethanol
production. Cane growers, particularly in the northeastern region, has
reportedly shifted to a more attractive crop like tapioca when the
Government limited the financial assistance via subsidy price to
sugarcane production in MY 2004. Meanwhile, the Government also
encouraged the alternative use of sugarcane as a raw material for
ethanol production by approving 13 new sugarcane/molasses-based ethanol
plants, to produce at around 2 million liters/day by CY 2007. However,
the current shortfall of sugarcane production resulted in a surge in
sugarcane prices at 1,000 bath/ton against the ethanol optimum prices of
600 baht/ton; molasses prices at 3,200 baht/ton against 1,800 baht/ton.
The Government kept the ethanol prices at 12.75 baht/liter. As a result,
the Government has recently allowed ethanol imports of 18 million liters
from India, which will be sufficient for ethanol demand during
September - December 2005. Gasohol, a mixture of 10 percent ethanol and
90 percent regular gasoline, is increasingly popular, as the prices are
relatively cheaper by 1.5 baht/liter than regular gasoline. At the
moment, there are three molasses-based ethanol plants producing around
400,000 liters/day to domestic oil refineries for gasohol. By the end of
CY 2005, there will be additional ethanol production of around 450,000
liters/day, of which 150,000 liters are from a molasses-based ethanol
plant, and the balance from two cassava-based ethanol plants. It is
expected that demand for molasses will be around 530,000 annually, given
the extraction rate of molasses for ethanol is 260 liter/ton of
molasses. The Government has also recently proposed an export ban on
molasses, amounting to around 1.5 million tons annually, in order to
secure domestic supplies of molasses for ethanol production. However,
the plan was strongly opposed by sugar millers because the ban will
adversely affect their revenue and farmer income.

According to the government plan, by 2007 there will be altogether 24
ethanol plants producing around 4.7 million liters/day, of which around
2.5 million liters are from eighteen sugarcane/molasses-based ethanol
plants, and 2.2 million liters are from six cassava-based ethanol
plants.

# Statistic Tables

## Table 1: Thailand's Sugarcane Production

+------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**    |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| **Country**      | **    |       |       |       |       |       |
|                  | Thail |       |       |       |       |       |
|                  | and** |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**    | **    |       |       |       | (1000 |       |
|                  | Sugar |       |       |       | HA)   |       |
|                  | Cane  |       |       |       | (1000 |       |
|                  | for   |       |       |       | MT)   |       |
|                  | Cen   |       |       |       |       |       |
|                  | trifu |       |       |       |       |       |
|                  | gal** |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
|                  | 2004  |       | 2005  |       | 2006  |       |
|                  |       |       |       |       |       |       |
|                  | Re    |       | Est   |       | For   |       |
|                  | vised |       | imate |       | ecast |       |
+------------------+-------+-------+-------+-------+-------+-------+
|                  | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                  | Off   | Estim | Off   | Estim | Off   | Estim |
|                  | icial | ate\[ | icial | ate\[ | icial | ate\[ |
|                  | \[    | New\] | \[    | New\] | \[    | New\] |
|                  | Old\] |       | Old\] |       | Old\] |       |
+------------------+-------+-------+-------+-------+-------+-------+
| **Market Year    | 12    |       | 12    |       | 12    |       |
| Begin**          | /2003 |       | /2004 |       | /2005 |       |
+------------------+-------+-------+-------+-------+-------+-------+
| Area Planted     | 1200  | 1200  | 1050  | 1050  | 1000  | 1000  |
+------------------+-------+-------+-------+-------+-------+-------+
| Area Harvested   | 1050  | 1050  | 990   | 990   | 950   | 950   |
+------------------+-------+-------+-------+-------+-------+-------+
| Production       | 64500 | 64500 | 48000 | 47820 | 42000 | 40000 |
+------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY     | 64500 | 64500 | 48000 | 47820 | 42000 | 40000 |
+------------------+-------+-------+-------+-------+-------+-------+
| Utilization for  | 64500 | 64500 | 48000 | 47820 | 42000 | 40000 |
| Sugar            |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| Utilizatn for    | 0     | 0     | 0     | 0     | 0     | 0     |
| Alcohol          |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| TOTAL            | 64500 | 64500 | 48000 | 47820 | 42000 | 40000 |
| UTILIZATION      |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+

## Table 2: Thailand's Production, Supply and Demand for Sugar

+------------------+-------+-------+-------+-------+-------+-------+
| **PSD Table**    |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| **Country**      | **    |       |       |       |       |       |
|                  | Thail |       |       |       |       |       |
|                  | and** |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| **Commodity**    | **S   |       |       |       | (1000 |       |
|                  | ugar, |       |       |       | MT)   |       |
|                  | Cen   |       |       |       |       |       |
|                  | trifu |       |       |       |       |       |
|                  | gal** |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
|                  | 2004  |       | 2005  |       | 2006  |       |
|                  |       |       |       |       |       |       |
|                  | Re    |       | Est   |       | For   |       |
|                  | vised |       | imate |       | ecast |       |
+------------------+-------+-------+-------+-------+-------+-------+
|                  | USDA  | Post  | USDA  | Post  | USDA  | Post  |
|                  | Off   | Estim | Off   | Estim | Off   | Estim |
|                  | icial | ate\[ | icial | ate\[ | icial | ate\[ |
|                  | \[    | New\] | \[    | New\] | \[    | New\] |
|                  | Old\] |       | Old\] |       | Old\] |       |
+------------------+-------+-------+-------+-------+-------+-------+
| **Market Year    | 12    |       | 12    |       | 12    |       |
| Begin**          | /2003 |       | /2004 |       | /2005 |       |
+------------------+-------+-------+-------+-------+-------+-------+
| Beginning Stocks | 1045  | 1045  | 1194  | 1215  | 724   | 732   |
+------------------+-------+-------+-------+-------+-------+-------+
| Beet Sugar       | 0     | 0     | 0     | 0     | 0     | 0     |
| Production       |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| Cane Sugar       | 6989  | 7010  | 5200  | 5187  | 4500  | 4330  |
| Production       |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Sugar      | 6989  | 7010  | 5200  | 5187  | 4500  | 4330  |
| Production       |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| Raw Imports      | 0     | 0     | 0     | 0     | 0     | 0     |
+------------------+-------+-------+-------+-------+-------+-------+
| Refined Imp.(Raw | 0     | 0     | 0     | 0     | 0     | 0     |
| Val)             |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| TOTAL Imports    | 0     | 0     | 0     | 0     | 0     | 0     |
+------------------+-------+-------+-------+-------+-------+-------+
| TOTAL SUPPLY     | 8034  | 8055  | 6394  | 6402  | 5224  | 5062  |
+------------------+-------+-------+-------+-------+-------+-------+
| Raw Exports      | 2281  | 2281  | 1630  | 1630  | 1300  | 1200  |
+------------------+-------+-------+-------+-------+-------+-------+
| Refined Exp.(Raw | 2579  | 2579  | 1990  | 1990  | 1600  | 1500  |
| Val)             |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| TOTAL EXPORTS    | 4860  | 4860  | 3620  | 3620  | 2900  | 2700  |
+------------------+-------+-------+-------+-------+-------+-------+
| Human Dom.       | 1980  | 1980  | 2050  | 2050  | 2100  | 2100  |
| Consumption      |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| Other            | 0     | 0     | 0     | 0     | 0     | 0     |
| Disappearance    |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| Total            | 1980  | 1980  | 2050  | 2050  | 2100  | 2100  |
| Disappearance    |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+
| Ending Stocks    | 1194  | 1215  | 724   | 732   | 224   | 262   |
+------------------+-------+-------+-------+-------+-------+-------+
| TOTAL            | 8034  | 8055  | 6394  | 6402  | 5224  | 5062  |
| DISTRIBUTION     |       |       |       |       |       |       |
+------------------+-------+-------+-------+-------+-------+-------+

## Table 3: Thailand's Exports of Sugar

+--------------------+-------------+--------------------+-------------+
| **Export Trade     |             |                    |             |
| Matrix**           |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| **Country**        | Thailand    |                    |             |
+--------------------+-------------+--------------------+-------------+
| ###### Commodity   | Sugar,      |                    |             |
|                    | Centrifugal |                    |             |
+--------------------+-------------+--------------------+-------------+
| Time Period        | Jan. - Dec. | Units:             | MTRV        |
+--------------------+-------------+--------------------+-------------+
| Exports for:       | 2004        |                    | **2005**    |
+--------------------+-------------+--------------------+-------------+
| U.S.               | 14615       | U.S.               | 14615       |
+--------------------+-------------+--------------------+-------------+
| Others             |             | Others             |             |
+--------------------+-------------+--------------------+-------------+
| Indonesia          | 1327521     | Indonesia          | 883085      |
+--------------------+-------------+--------------------+-------------+
| Japan              | 754013      | Japan              | 393767      |
+--------------------+-------------+--------------------+-------------+
| China              | 286468      | China              | 17398       |
+--------------------+-------------+--------------------+-------------+
| Malaysia           | 577117      | Malaysia           | 94958       |
+--------------------+-------------+--------------------+-------------+
| South Korea        | 228157      | South Korea        | 60865       |
+--------------------+-------------+--------------------+-------------+
| Cambodia           | 195914      | Cambodia           | 101191      |
+--------------------+-------------+--------------------+-------------+
| Taiwan             | 418774      | Taiwan             | 96256       |
+--------------------+-------------+--------------------+-------------+
| Russia             | 76942       | Russia             | 30914       |
+--------------------+-------------+--------------------+-------------+
| Singapore          | 117294      | Singapore          | 25819       |
+--------------------+-------------+--------------------+-------------+
| Bangladesh         | 304502      | Bangladesh         | 55279       |
+--------------------+-------------+--------------------+-------------+
| Total for Others   | 4286702     |                    | 1759532     |
+--------------------+-------------+--------------------+-------------+
| Others not Listed  | 533481      |                    | 126100      |
+--------------------+-------------+--------------------+-------------+
| Grand Total        | 4834798     |                    | 1900247     |
+--------------------+-------------+--------------------+-------------+

Note: The figures for 2005 are exports for the period of Jan. -- Jun.

## ![](media/image3.wmf){width="6.916666666666667in" height="3.579861111111111in"}Table 4: Thailand's Annual Raw Sugar Exports (MTRV)

## ![](media/image4.wmf){width="6.833333333333333in" height="4.079861111111111in"}Table 5: Thailand's Annual White and Refined Sugar Exports (MTRV)

End of Report.