Cabinet OKs sugar price hike
Wednesday, April 30, 2008
VICHAYA PITSUWAN & PITSINEE JITPLEECHEEP
Stocks watched to stop hoarding
Retail sugar prices will soon rise by as much as 37% following the cabinet's decision yesterday to approve an increase of five baht a kilogramme in the ex-factory price of the commodity.
Industry Minister Suwit Khunkitti said the increase needed to take place as soon as possible to prevent hoarding. All sugar stock movements have been suspended until the new prices take effect, he said.
The increase will become official as soon as the decision is published in the Royal Gazette.
The price increase was proposed by the Office of the Cane and Sugar Board (OCSB) in a bid to meet rising costs of cane production and cover a promised increase in cane prices to 807 baht a tonne for farmers.
The decision will push the ex-factory price of raw sugar to 19 baht per kilogramme from 14 baht, with refined sugar rising to 20 baht from 15 baht.
The retail price with VAT will jump from 17.25 baht to about 23.60 baht per kilogramme, which is still almost 35% less than what consumers in many other countries pay. All proceeds from the additional five-baht increase will go to the Cane and Sugar Fund to help alleviate cane farmers' debts.
''With the cane price at 807 baht per tonne, the fund will bear a total debt of 24.83 billion baht so the sugar price increase is for debt relief only,'' Mr Suwit said. ''Factories will not benefit from this and all the debts are expected to be repaid within three years.''
Rattanaporn Chuengsanguansit, the OCSB secretary-general, said the cabinet made the right decision.
''Without support, they (cane farmers) would shift to other crops resulting in sugar output declining, which will damage the country's cane and sugar industry in the long run,'' she said. ''Farmers deserve to be paid better as cane prices have always been calculated from selling prices and not from production costs.''
Ms Rattanaporn said a satellite survey in February showed that 330,000 rai of cane farms had been converted to other crops.
Prakit Pradipasen, chairman of the Thai Sugar Millers Corporation Limited, said the increase was very dramatic.
''The cabinet decision is a shock to me, though I have no problem with it as farmers will have more income,'' he said. ''But the move will definitely reduce domestic sugar consumption and indirect effects will be seen through higher production costs among food and soft-drink producers.''
He predicted that Thais would have to spend an additional 100 baht per head per year on sugar.
''However, I think the rise in the sugar price will not be as critical as for other important commodities like rice, as sugar is less essential. I think the effects will be bearable to the public.''
OSCB research reveals that the average Thai consumes up to 10 kilogrammes of sugar per year.In addition to a price increase, the cabinet has announced a three-year cane industry development plan to improve cane productivity, reduce production costs and support ethanol production from sugar.
The plan aims to lift cane production by 20% to 95 million tonnes in the 2010-11 harvest year, on the same amount of farmland, Mr Suwit said.
Prangnee Chaipidej, advertising and PR manager of Serm Suk Plc, the local bottler of Pepsi, Mirinda and 7-Up, said the company would be severely hurt by the 30% rise in sugar prices as it was one of main ingredients in carbonated drinks. ''The sugar price rise will cause more trouble for us since we were dealing with the impact from oil prices, which have been surging for months. Moreover, labour wages are likely to increase as well,'' she said.
thailandoutlook.com