Sugar imports from Thailand see upswing following ATIGA enforcement

By the end of the 2019 to 2020 crop the export of Thai sugar to the nation had reached more than 862,000 tonnes, 12.1% higher than the volume of domestically produced sugar.

In line with the nation’s commitments in ASEAN under the ASEAN Trade in Goods Agreement (ATIGA) related to the application of tariff quotas under the WTO, the country first abolished sugar import tariff quotas for ASEAN member states on January 1 of this year.

This resulted in the nation becoming Thailand's second largest sugar export market during the first half of the year, accounting for 16% of their overall national export volume, behind only Indonesia with 42%. This is in contrast to previous years when the Vietnamese market did not represent an important export market for the Thai sugar industry.

Recent years has seen Thai sugar become one of the main rivals of the local sugar industry, with the neighbouring nation ranking fourth in the world in terms of sugar production and second in relation to exports. Annually, the output of cheap smuggled sugar from Thailand to the country is estimated to make up more than 30% of domestic sugar demand, therefore negatively affecting domestic sugar prices.

According to VSSA, approximately one third of sugar factories based in the nation were forced to close during the 2019-2020 crop. The accumulated output in the this crop reached 7.39 million tonnes of sugarcane, representing a drop of 39.4%, along with over 769,160 tonnes of all kinds of cane sugar, a fall of 34.3%, marking the lowest level over the past 19 years due to unfavourable weather changes and competitive pressure from imported sugar and sweeteners.

Domestic sugar prices are heavily dependent on imported sugar from the Thai market. After the ATIGA Agreement comes into effect, domestic sugar enterprises must compete alongside Thai sugar, primarily through the consumer-retail segment, such as business-to-consumer trade, and small and medium sized food beverage processing enterprises. This is largely due to sugar imported from Thailand failing to meet the strict requirements of large-scale food and beverage producers such as Pepsi and Coca-Cola.

Furthermore, liquid sugar products extracted from corn, also known as chemical sugar, originating from the Republic of Korea and China with a 0% tax rate and no quota have consistently flooded the nation, therefore creating pressure competition for the domestic sugar industry. This type of sugar has a lower selling price of 10% to 15% compared to cane sugar, with its sweetness far higher than that of cane sugar.

Statistics of the General Department of Customs indicate that the volume of liquid sugar imported into the country in 2019 reached more than 190,000 tonnes, representing a positive growth rate of 26.7% compared to 2018, and up 31.7% over 2017.

At present, the export price of Thailand's white sugar FOB for the 2019-2020 crop year is at an average of 11 baht / kg.

Currently, Thailand's export prices are as low as production costs in order to compete in the global export market. This is the primary reason that makes it challenging for the local sugar industry to compete with Thai sugar, resulting in the shutdown of several domestic factories.