Vietnam’s sugar industry is expected to face a great deal of difficulties as the country will drop tariffs on imported sugar from ASEAN under the ASEAN Trade in Goods Agreement (ATIGA) in 2020.

Farmers harvest sugarcane in Tuy Hoa, Phu Yen province. (Photo: VNA) 

“With ATIGA starting in January next year, we [sugar producers] are still not clear on Vietnam’s integration policy for its sugar industry. As of now, smuggled sugar has already flooded the market in large quantities,” K.V.S.R. Subbaiah, general director of KCP Vietnam Industries Limited Co. – a sugar producer based in central Phu Yen province – told VnEconomy.

 Subbaiah said the price of sugar is expected to plunge 15-20 percent after ATIGA. This may drive sugarcane prices to a point where it’s no longer profitable for farmers to grow them. As farmers switch to different crops, sugar plants would be forced to shut down due to the lack of input.

 Nguyen Truong Chinh, director of the Tuy Hoa Sugar Plant, said for the last three years sugarcane prices have averaged 800 VND per kilogramme (3.4 US cents), which is considered just barely acceptable by many farmers.

 Even at that price point, this year has seen several localities dropping sugarcane trees for other crops. Chinh said his plant’s sugar field has been reduced from 8,000ha last year to just 5,500ha. 

 Any further drop in price, he said, may just be the straw that breaks the camel’s back and possibly even triggers an exodus of sugarcane farmers from the industry.

 It has been a few bleak years for sugar producers as increasing sugar surplus and dwindling demand in the domestic market made it difficult for plants to stay in production. In just two years, the number of sugar plants in Vietnam has dropped to 36 from 46 in 2017, among which 17 were reporting losses.

 Higher production cost was said to be the bane of domestic players, especially after ATIGA when they are forced to lower prices to compete.

“Production cost for Vietnamese producers remained too high at 50 USD per tonne as compared to 30 USD in Thailand, 18 USD in Australia and 16 USD in Brazil,” said Professor Vo Tong Xuan, an agriculture expert and scientist.

 Experts have long been urging the Government to come up with a comprehensive solution to rescue and develop the sugar industry, starting with greater effort to stop smuggled sugar and higher tariffs on imported liquid sugar. Long-term strategies include merging sugarcane land plots to take advantages of economy of scale and planting quality sugarcane varieties to raise productivity.