Can Vietnamese sugar compete with Thai sugar?

Only by reducing production costs to match those of other countries in the region can Vietnam's sugar industry survive in the future, especially when the ASEAN sugar tariff rate is eliminated in 2015.

Sugar mills can reduce costs by utilizing bagasse to generate electricity and participate in the post-sugar value chain - Photo: Huynh Loi

There have been production models that bring high profits to sugarcane growers, while utilizing bagasse to produce biomass electricity and participating in the post-sugar value chain has helped some factories not only survive but also thrive in the current times.

The direction opens up from the 200-ton Club...

One of the biggest challenges facing Vietnam's sugar industry today, according to businesses, is the excessively high production cost due to low sugarcane yields, only about 70 tons/ha compared to 100 tons/ha in Thailand, while the quality is not high, land is fragmented, and farming and processing technologies are outdated.

Mr. Nguyen Thanh Son, former head of the sugarcane sub-region in the Mekong Delta, acknowledged that because widespread mechanization is not yet possible in sugarcane farming, and cultivation is mainly done manually from planting to harvesting, digging holes, etc., the cost of sugarcane and sugar production is increasing.

"Furthermore, most sugarcane fields in the Mekong Delta and some other areas are fragmented and small-scale, with a complex network of canals and ditches... so high production costs are inevitable," Mr. Son said.

Associate Professor Dr. Nguyen Bao Ve, former head of the Faculty of Agriculture at Can Tho University, believes that Thailand, like other countries, has "industrialized" sugarcane farming, with each household cultivating an average of several tens to several hundred hectares of sugarcane, resulting in low production costs and very high sugar content.

Meanwhile, sugarcane production in Vietnam has long been fragmented and small-scale, lacking adequate care, resulting in low yields and poor quality (sugar content).

"If we want to improve this situation, we urgently need to fundamentally replan the sugarcane fields, linking the raw material areas with sugar factories. We need to boost investment in new varieties to increase sugarcane yield and quality, and implement a comprehensive set of solutions to help farmers make a living from sugarcane," Mr. Ve said.

Drawing inspiration from the 200-ton Club model in Hau Giang, Mr. Nguyen Hoang Ngoan, Deputy General Director of Can Tho Sugar Corporation (Casuco), affirmed that it is entirely possible to lower the cost of sugarcane and sugar if investments are made in the right direction.

According to Mr. Ngoan, for many years, the approximately 120 members of the 200-ton Sugar Club have consistently achieved high profits. Even during the last two seasons when sugarcane prices were low, the club members still earned a profit of 30-50 million VND/ha, and in years with good prices, profits exceeding 100 million VND/ha were commonplace.

"This is considered the most effective farming model currently in the sugarcane industry because the sugarcane yield is very high, reaching 180-200 tons/ha, double the current average yield, plus it has high sugar content and a stable output guaranteed by the company," Mr. Ngoan said.

Mr. Truong Van Hien, head of the 200-ton Club, said that this area previously also produced sugarcane in a spontaneous manner, resulting in low efficiency. However, since Casuco gathered a number of farmers to establish the 200-ton Club, provided technical support and new varieties, organized many workshops and field trips for farmers to learn from best practices, many households have changed their production habits, improving sugarcane yield and quality.

“The factories are currently buying sugarcane at 800 VND/kg for 10 Brix sugarcane at the field, but I just sold it for 930 VND/kg thanks to the higher Brix sugarcane content, due to production under the 200-ton Club program with new and very effective methods,” boasted farmer Le Van Chien (Hiep Hung commune, Phung Hiep district).

Sugarcane is not just for making sugar.

The current reality of the sugar industry shows that businesses mainly focus on the stage of crushing sugarcane to produce sugar, while the industry's value chain is much longer and has significant potential.

Besides sugar, bagasse is used to produce biomass electricity, molasses is used to manufacture industrial alcohol (these are related industries to sugar), and sugar factories also participate in processing sugar by-products such as confectionery and soft drinks.

Mr. Dang Van Thanh, chairman of Thanh Thanh Cong Group (TTC), said that after AFTA comes into effect, from 2015 onwards, the concept of smuggled sugar will no longer exist, and competition between domestic and imported sugar will be much fierfier than it is now.

Therefore, to compete with imported sugar, in recent years TTC has focused its investment on two main directions: reducing input costs and increasing revenue from sugar-related and downstream products.

"Only businesses that can bring their sugar production costs down to match those of imported sugar will have a chance of survival," Mr. Thanh said.

According to Mr. Thanh, the foundation of the sugar industry is sugarcane, and the most influential factor affecting sugarcane yield is the seedling, an area where Vietnam is still very weak.

The majority of sugarcane cultivation in the country uses low-quality varieties, many of which are imported from China and susceptible to pests and diseases. Therefore, TTC established a sugarcane research center and invited leading Vietnamese scientists as well as Indian experts to work there to create a set of high-quality sugarcane varieties for Vietnam.

The company also encourages its member factories to collaborate with farmers and implement mechanization models tailored to local conditions to reduce production costs.

"To date, over 10% of the group's sugarcane area has a yield comparable to that of advanced sugar-producing countries in the region. Our Gia Lai Sugar Mill has produced sugar at a cost of approximately 9,000 VND/kg, the same as in Thailand," Mr. Thanh said.

Along with reducing production costs, according to Mr. Thanh, TTC is also implementing a series of projects aimed at increasing revenue from by-products and downstream products related to sugar.

Based on the experience of countries with developed sugar cane industries, sugar cane not only produces sugar but is also a raw material for the industrial alcohol processing industry, from molasses - a byproduct of sugar processing, to the confectionery and beverage industries. Furthermore, bagasse is also an important input for the biomass power generation industry.

"The Bourbon Tay Ninh bagasse power plant alone supplies 46% of Tay Ninh province's electricity consumption during the dry season," Mr. Thanh said.

According to Mr. Thanh, bagasse-based electricity is an ideal supplement to hydropower because when the dry season arrives, hydropower plants have less water, and it is also the beginning of the sugarcane harvest season.

"If we utilize all the bagasse from the 42 sugar factories nationwide, we could generate an amount of electricity equivalent to half the capacity of the nuclear power plant that Vietnam plans to build in Ninh Thuan. The problem is that the State needs to have a mechanism to support the purchase price of electricity from bagasse so that factories have the incentive to invest in this industry," Mr. Thanh said.

According to rural economics