Thailand is unlikely to experience a sugar shortage this year since supply still exceeds demand, insists the Cane and Sugar Board.

Secretary-general Prasert Tapaneeyangkul emerged yesterday to confirm the adequacy of the domestic sugar supply amid growing concerns that a shortage was looming, similar to that of palm oil.

"By increasing the domestic sugar allocation, we assure the people that we have a significant amount of sugar, unlike in the case of palm. Thailand does not produce enough palm, but for sugar, our production outstrips the demand by several times," said Dr Prasert.

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Sugar millers are planning to take back the sugar they previously agreed to allocate to the Commerce Ministry to ease the tight supply of the commodity, blaming the ministry for delays in distribution.

The Thai Sugar Millers Corporation (TSMC), which comprises 47 local mills, is preparing to ask the Cane and Sugar Board (CSB) to consider giving back the sugar allocated to the Commerce Ministry so that it can distribute the sugar itself, said TSMC executive chairman Vibul Panitvong.

The Industry Ministry's Cane and Sugar Board on March 11 approved the Commerce Ministry's request for a special allocation of 100,000 tonnes of sugar to distribute through 11 traders to relieve the shortage and prevent a further spike in prices.

The approval came after retailers complained about their diminishing stocks and millers' reluctance to supply them.

A CSB source said that so far, 80,000 out of the 100,000 tonnes of sugar had been allocated to the Commerce Ministry, but only about 3,000 tonnes had been released to the market.

"In fact, we have seen very little progress in the distribution [of sugar]," said Mr Vibul.

Industry permanent secretary Witoon Simachokdee, also the CSB chairman, said the board would meet on May 24 to consider the allocation of 100,000 tonnes of sugar to the Commerce Ministry.

The CSB in March raised the quota for local consumption by 100,000 tonnes to 2.2 million tonnes, expecting that demand for domestic food and beverage production would rise in line with the recovering economy.

An increased quota would be allocated largely to the Commerce Ministry.

In Thailand, the sugar business operates under a quota system, with white-only quota A for local consumption; raw-only quota B to be exported by the quasi-government Thai Cane and Sugar Corp; and white-and-raw quota C to be exported by mills through traders.

source:bangkokpost

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The government may reduce subsidies for sugar and cane farmers later this year in a bid to curb public spending, Prime Minister Abhisit Vejjajiva says.

Mr Abhisit yesterday said he supported the findings of a study by the Thailand Development Research Institute (TDRI) which recommended that subsidies for cane and sugar be altered later this year when the Cane and Sugar Fund should be free of debt.

This would allow the government to cut its spending by reducing the level of assistance to farmers.

The study showed that subsidising the sugar industry had resulted in significant costs to the public purse.

The study also examined the impact of subsidising products such as rice, tapioca, longan, rubber and dairy goods.

The combined subsidies cost the government about 70 billion baht a year. The sugar and cane sector accounted for about 12-16 billion baht per year.

The cane and sugar industry has not followed market demand for three decades as the government developed a quota system to allocate supply for the domestic and export markets. The Cane and Sugar Fund was also set up to provide financial assistance to farmers.

The subsidies drive the industry's growth by lifting yields and total sugar output, which has risen to 80 million tonnes from 20 million over 30 years.

But they also distorted the market and resulted in the fund being mired in debt as farmers failed to pay back loans.

TDRI president Nipon Paopongsakorn said a scheme like the new price insurance scheme used with maize and tapioca crops should replace sugar subsidies.

"It [a price insurance scheme] will help reduce the burdens on all related parties including farmers, as well sealing loopholes for corruption," said Dr Nipon.

More than 400,000 farmers are signed up with the maize price insurance scheme, compared with the 80,000 who benefited from the previous subsidies. More than 400,000 tapioca farmers also benefit from the new programme compared with 250,000 previously.

Rice farmers engaged in the government programme trebled to about 3 million once the insurance scheme was implemented. But despite this surge, government expenditure fell to 30 billion baht from the 70-80 billion baht it paid in subsidies each year.

Under previous rice subsidies farmers pledged paddy at authorised millers at prices set by the government. But market prices rarely exceeded those set by the government, leaving the state with huge rice stockpiles.

The new options plan minimises state expenditure and ensures farm incomes are supported.

Farmers register with the scheme when a benchmark price for paddy and guaranteed minimum prices for farmers are set. If the benchmark price is lower than the price guarantee, farmers will be compensated for the difference.

Mr Abhisit, speaking yesterday at a seminar organised by the National Anti-Corruption Commission on government intervention in farm products and anti-graft measures, pledged to invest in an IT system to gather data in order to help prevent corruption.

source: bangkokpost

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KOH KONG, CAMBODIA : Khon Kaen Sugar Industry Plc (KSL) aims to invest about 15 billion baht over the next five years to double its sugarcane output in Thailand and continuously expand its presence in Cambodia and Laos.

Thailand's only listed sugar miller expects the group's total revenue to top 20 billion baht from last year's 12 billion baht when the expansion is completed.

Chairman Chamroon Chinthammit said the company would spend 6-7 billion baht to build a new factory complete with a power and ethanol plant in Sa Kaeo. The Bo Phloi mill in Kanchanaburi also requires an investment of 8 billion baht, of which half is being spent on the first phase of construction.

The group currently operates four sugar mills and cane farms in Khon Kaen, Chon Buri and Kanchanaburi, with combined sugar production of 5 million tonnes per crop.

KSL projects that its local sugarcane output will double to 10 million within five years, moving it from the fourth to third place in the country in terms of overall production, said Mr Chamroon.

The company on Monday inaugurated its $100-million sugar mill in Koh Kong, the first of its kind in Cambodia. The group, together with Cambodian and Taiwanese partners, has been granted a 90-year farming concession for 20,000 hectares in Koh Kong along the border of Thailand and Cambodia.

An estimated 240,000 tonnes of sugarcane will be processed in the 2009-10 season, the first year of operation.

"We are aiming for the total production of 2 million tonnes from Cambodia within five years while our crushing capacity in Laos will be expanded to 700,000 tones from 300,000 to 400,000 tonnes at present," Mr Chamroon said.

KSL has also been awarded a concession of 30 years for 10,000 hectares in Laos. The Sawannakhet mill, with total investment of $40 million, began operating at almost the same time as the Koh Kong plant.

Laos and Cambodia are among the 19 developing countries entitled to duty-free sugar exports to European markets. KSL has signed five-year contracts with London-based Tate & Lyle to supply all of its output from Cambodia and Laos at the price of 19 cents a pound.

Ly Yong Phat, one of Cambodia's top businessmen and a close ally of Prime Minister Hun Sen, holds 20% in KSL's joint venture while the Thai sugar miller controls 50%. The remaining 30% is owned by the Taiwanese partner Ve Wong Corp.

Speaking at the opening ceremony, Prime Minister Hun Sen vowed to seek the required land and labour for KSL, which needs 4,000 employees, saying the sugar industry was vital for the Cambodian economy. According to data from Thailand's Commerce Ministry, the country exports 300,000 tonnes of white sugar to Cambodia.

Chalush Chinthammit, KSL's assistant vice-president for business development, said the group expected up to 20% growth in revenue this year, thanks to the high sugar price, now at a 28-year high of 29 cents a pound, and higher production than last year.

Given the current supply shortage, sugar prices will remain on the uptrend, definitely breaking the 30-cent mark by the end of the second quarter, Mr Chalush added.

KSL shares closed yesterday on SET at 14.70 baht, up 50 satang, in trade worth 44 million baht.

source: bangkokpost

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Siam City Bank has resisted selling bad assets as it waits for a better price as the economy improves.

Executive vice-president Parinya Patanaphakdee said the bank had cancelled non-performing loan (NPL) sales with a combined value of around 9 billion baht due to unsatisfactory prices.

Though several investors joined the NPL auction, bids were lower than the bank expected. It plans to resell the bad debts next year.

SCIB, a mid-sized bank with total assets of 398.5 billion baht, wanted to reduce gross NPLs to 5% by the end of this year from 7.98% as of October. Its net NPLs stand at 4.22%.

Mr Parinya said the quality of bad assets had improved in line with a better economic climate and the bank's management. In particular, the Wangkanai Group, a large NPL customer in the sugar industry, has shown significant improvement because of higher commodity prices. Loan repayments of 4 billion baht have proceeded as normal under a debt restructuring process.

"This case signals a good trend for other large NPL customers. We hope to decrease NPLs significantly next year by both sales and prudent management despite a hefty loan growth target," he said.

The bank plans to make new loans of 18 billion baht in 2010, a growth rate of 6% year-on-year, in line with the industry's expected loan growth of 5-6%. The bank forecast Thai gross domestic product growth of 3.5% next year.

However, the bank expects to book zero loan growth this year due to a contraction in corporate loans in the sluggish economy. It will also pay less attention to state-owned enterprise loans because of marginal yields.

source: bangkokpost

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