Sugar inventories at record high

Smuggled sugar from Thailand is pouring across the border at a price several thousand dong cheaper than domestic businesses, causing sugar inventories to reach a record high.

Sugar smuggled from Thailand is pouring across the border in many sophisticated ways, across a wide area, and at prices several thousand dong cheaper than domestic businesses, causing sugar inventories to reach record highs.

Speaking at the conference “Sustainable Sugar Consumption Solutions” recently held in Ho Chi Minh City, Mr. Pham Quoc Doanh – Chairman of the Sugarcane and Sugar Association said that the amount of sugar in stock a week ago was approximately 750,000 tons, of which the inventory at the factory accounted for about 90%. This is a record number ever for the Vietnamese sugar industry, showing an unusual crop year.

Mr. Doanh commented that, in addition to the objective factor of the weather causing sugar factories to enter the pressing season later than planned, resulting in a large output in the final stage, the increasingly complicated situation of smuggling from Thailand is the main cause of this problem.

“Previously, smuggling activities were only concentrated at the borders of the southern provinces, but now they have spread to the north. From being transported by motorbike, there are now boats and ships crossing rivers and seaports, and then being transported to consumption by trucks of several dozen tons,” he said, affirming that inventory is a real difficulty for businesses, and there is no speculation to raise prices.

Currently, the wholesale price of smuggled sugar from Thailand is about VND1,000-2,000 per kilogram lower than domestically produced sugar. Many sugar companies predict that this difference may continue to widen as Thailand applies export protection to this product. This will further reduce the competitiveness of domestic products and slow down consumption.

In 2015, sugar imported from Thailand was about 382,000 tons, equivalent to 1/3 of the output produced by domestic enterprises. According to estimates of the Sugar Association, for each 50 kg bag of sugar successfully transported, traders earned a profit of about 40,000-50,000 VND.

Smuggled sugar from Thailand has increased sharply, causing domestic inventories to reach record levels.

Mr. Dang Phu Quy, a member of the Board of Directors of Quang Ngai Sugarcane Joint Stock Company, said that the sudden increase in sugar inventory also came from the sharp decrease in Thailand's export output to the Chinese market due to strict control, while Vietnam's policy was more "flexible" so sugar continuously flooded in.

In addition, increasingly sophisticated trade fraud has also had a significant impact on the operations of the sugar industry in recent times. Some discovered cases show that many establishments do not have factories and input materials but still register their business with the function of producing and processing sugar for the purpose of decanting into small bags of about 0.5-1 kg; or buying and using documents from official sugar importing companies within or outside the tariff quota to declare the origin of the goods.

Proposing a solution to this situation, a representative of Thanh Thanh Cong Tay Ninh Sugar Joint Stock Company said that they had raised the issue of buying back the smuggled sugar confiscated by the authorities with 5 provinces. This enterprise requested that the provinces reduce 10% of value added tax and 20-25% of unloading costs, and at the same time comply with the Law on Asset Auction, but only enterprises with factories capable of refining and ensuring quality can participate to eliminate small traders who want to decant and distribute smuggled goods. However, most provinces did not support this option because they wanted to increase the starting price and comply with the law.

In addition to some proposed solutions such as recommending the Anti-Smuggling Crime Police Department (C74) to increase patrols and strictly handle smuggled goods, develop a set of product quality standards, improve the distribution network, etc., many businesses also expressed their intention to adjust the selling price to narrow the gap between domestic and smuggled sugar. This is considered a feasible measure to limit the impact of smuggled sugar, but it needs more time to carefully consider and implement simultaneously to avoid directly affecting the raw material purchase price of farmers.

According to VNE