Profits of Vietnamese sugarcane growers lower than Thailand and Indonesia

VCN – The current profit of Vietnamese sugarcane growers is much lower than that of growers in other countries such as Thailand, Indonesia and the Philippines. This does not create motivation for sugarcane growers to participate in production. VCN - At the seminar entitled “Towards sustainable development of Vietnam’s sugar industry” jointly held by Forest Trends on January 21, many issues about the competitiveness of the Vietnam sugar industry with countries in the region were pointed out.
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Profits of Vietnamese sugarcane growers lower than Thailand and Indonesia
Illustrative photo. Internet

Production cost is higher than Thailand

At the seminar entitled “Towards sustainable development of Vietnam’s sugar industry” jointly held by Forest Trends on January 21, many issues about the competitiveness of the Vietnam sugar industry with countries in the region were pointed out.

Dr. Nguyen Vinh Quang, the Forest Trends’ representative, presented briefly the report on "Supplies of Vietnam's sugar industry - the current situation and some aspects of sustainable development" as saying that as per the survey by the LMC Business Consulting Firm in the UK on the total cost of sugar production in 22 areas of eight sugarcane growing countries in the world from the crop of 2000 - 2001 to 2018-2019, the production cost of one ton of sugar in Vietnam is higher than in the Philippines and Thailand but lower than in Indonesia and China.

In the period 2014/2015 - 2018/2019, the total production cost of 1 ton of white sugar in Vietnam was higher than in the Philippines by US$43.3 - US$105.6, higher than in Thailand by US$116.4- US$241.6, but lower than Indonesia on average from US$17.8 - 121.4 and much lower than China from US$331.8 - 511.7.

The costs in the field and in the factory, the administrative cost in the total production cost of white sugar in Vietnam is higher than in Philippines and Thailand, equal to Indonesia in private sector but lower than in Indonesia in the public sector and lower than in China.

“The sugarcane production capacity in Vietnam needs to be improved in all stages, especially in sugar processing and manufacturing to reduce the cost and price, improving competitiveness in the integration period," Quang said.

Serious imbalance in benefit-sharing

At the seminar, Forest Trends’ expert To Xuan Phuc also said that there are still many shortcomings in the sustainability of the supply chain of the sugar industry.

The forms of association between sugarcane growers and sugar mills have been completely agreed upon by the two parties and lacked legal binding. Sugar mills will decide the price and quality of sugarcane purchased from households.

In contrast, although sugarcane growers signed the contracts supplying raw materials to the sugar factory, they may easily break the contract when receiving an offer to buy sugarcane at a higher price from another mill.

The benefit-sharing between stages in the supply chain is currently imbalanced, the sugarcane growers play an important role but receive the least benefits. Specifically, the sugarcane growers only receive less than 11% of the total profit from the chain, followed by sugar factories. Almost half (about 44%) of profits belong to the distribution stage.

“The profit level of Vietnamese growers is lower than in other countries such as Thailand, Indonesia, and the Philippines when they join the chain. This does not create motivation for sugarcane growers in Vietnam to participate in production," said Phuc.

Ho Thanh Bien, a sugarcane grower in Tay Ninh, said currently, disease has caused many impacts. All input materials and materials sharply increased, leading to high production costs, but the price of output products rose insignificantly.

“Although some sugar mills still earn high profits, they have not yet shared profits with farmers and producers in an appropriate manner. Farmers make a lot of products for the factory to produce, but they only get small benefits,” Bien said.

The biggest difficulty of farmers today is that they do not know the actual value of their products.

Mr. Bien suggested that the Government should develop a Law on Sugar or a Resolution on State management in this area. The selling, buying and benefit-sharing between the mill and farmer must be specified in a transparent manner.

In general, the competitiveness of the whole sugar industry is very weak, said Tran Cong Thang, Director of the Institute of Policy and Strategy for Agriculture and Rural Development (MARD). Both businesses and farmers are facing difficulties. For further development, associations and businesses of the whole industry should propose to the Government.

“The control of smuggled sugar must be strengthened. In addition, farmers and factories are required to have cooperative links. Businesses play a leading role, but the information must be transparent. The role of the local government also needs to be enhanced in purchasing raw materials, protecting investors for farmers,” Thang said.

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