Beruflich Dokumente
Kultur Dokumente
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing?
Thailand — will it continue to grow?
Thailand’s cane industry has grown considerably over the last ten years.
But the situation facing the cane sector is changing: low sugar prices and policy reform have created new
challenges.
What does this mean for the future of the industry?
16 60 24
12
Million tonnes, tq)
40 16
No. of factories
10
8 30 12
6
20 8
4
10 4
2
0 0 0
2009/10 2011/12 2013/14 2015/16 2017/18 2009/10 2012/13 2015/16 2018/19
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 3
Presentation structure
• The current situation facing the Thai sugar sector — how has policy reform affected
the industry?
• The prospects for the cane crop in 2018/19 — is the risk on the upside or the
downside?
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 4
The current situation
Policy reform — a recap
At the beginning of 2018, Thai sugar policy underwent a major change.
This will have implications for the industry going forward.
Pre-reform Post-reform
Domestic price Fixed domestic market price. Domestic prices are free-floating.
Domestic sales Mills were allocated a fixed quota for sales to the Quotas removed.
domestic market.
One month sugar reserve for the local market.
Cane and Sugar Fund Domestic consumers paid an additional Baht 5 per The levy on domestic sugar sales abolished.
kg levy that was used to finance the Cane and Sugar
Fund. Difference between the domestic price and world price (incl. Thai
premium) is collected by the Cane and Sugar Fund.
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 6
What has happened to domestic prices?
Domestic prices have fallen, but remain above the returns from the world market.
Millers pay the difference between the domestic and export prices into the Cane and Sugar Fund (CSF),
which is then shared with the growers.
Domestic price evolution vs. world price
Pre-reform Post-reform
20
19
18
Baht/kg (excl. VAT)
17
16
B5/kg levy
paid to Fund
15
Difference paid to the CSF
14
13
12
11
10
May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 7
Implications for cane prices
Pre-reform, cane prices were maintained at B1000/tonne or above, with help from the supplementary payment.
This was high enough to keep farmers happy.
In 2017/18, low sugar prices meant that the actual cane price fell short of the provisional cane price. CSF funds
look insufficient for millers to be repaid the difference.
2018/19 price set even lower (B700/tonne). But farmers will receive a top-up payment (government & CSF).
Cane prices pre-reform (@10 CCS) Cane prices post reform (@10 CCS)
1,200 1,200
Provisional cane price = B880/tonne
Actual cane price = B792/tonne
1,000 1,000
Provisional cane price = B700/tonne
Supplementary payment = B100/tonne
800 800
Baht/tonne
Baht/tonne
600 600
400 400
200 200
0
0
2017/18 2018/19
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Cane price Supplementary payment Provisional cane price Supplementary payment
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 8
Crop prospects
2018/19 crop prospects
The market consensus is for a crop of +/- 125 million tonnes of cane and +/- 13.5 million tonnes of sugar.
But Thailand has surprised us before! Is the risk on the upside or the downside?
Progress to date is ahead of last year’s record crop.
140 16
14
120
12
10
80
8
60
6
40 4
20 2
0
0 Nov Dec Jan Jan Feb Mar Mar Apr May May Jun
Nov Dec Jan Jan Feb Mar Mar Apr May May Jun
2014/15 2015/16 2016/17 2017/18 2018/19 2014/15 2015/16 2016/17 2017/18 2018/19
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 10
Planting decisions for Thai farmers
Plantings take place in Q4 in sandy soils (Northeast) and Q1 for clay soils.
Since last year, cassava prices have risen sharply, while sugar has fallen and rice has remained steady.
Reports of Q4 plantings point to farmers switching away from cane (10-20% down).
Planting times for cane and alternative crops Sugar vs. alternative crop prices
(October 17 = 100)
180
Clay soils
Cane Apr - May 160
Cassava Mar - May
60
Oct 2017 Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 11
Cassava prices hit historical highs, but now falling
Cassava root prices have remained high over the last 18 months.
A combination of smaller planting (due to low prices), adverse weather and disease problems pushed prices
to historical highs.
Thai cassava root prices
3,500
Mealybug infestation Poor weather in Thailand and
disease in Cambodia/Vietnam
3,000
2,500
Baht per tonne
2,000
1,500
500
0
Jan 2007 Jan 2009 Jan 2011 Jan 2013 Jan 2015 Jan 2017 Jan 2019
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 12
The importance of the supplementary payment
The supplementary payment was critical in supporting the cane price during periods when world sugar prices
were low or falling relative to cassava/rice.
But for 2018/19, the additional payment will be modest and does not look to be enough to prevent farmers
switching.
Cane prices vs. cassava prices in Thailand
1,200 2,400
1,000 2,000
800 1,600
600 1,200
400 800
200 400
0 0
06/07 08/09 10/11 12/13 14/15 16/17 18/19
Cane price Supplementary payment Cassava (OAE)
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 13
Issues going forward
Can the industry continue to expand?
Current location of Thailand’s sugar mills Future expansion:
• Three new mills were due to start in
2018/19, but one is delayed to 2019/20.
North
10 Mills • EIA requirements have delayed other new
17/18 production: 3.5 mn t projects.
Questions:
Northeast • Many licences to build new mills are
22 Mills
17/18 production: 6.7 mn t
approved, but how many will be utilised?
• Will the liberalisation of the industry slow
Centre the rate of expansion?
20 Mills
17/18 production: 3.8 mn t • Will ethanol absorb some of Thailand’s
East surplus before it reaches the world market?
5 Mills
17/18 production: 0.7 mn t
• What role will bio-chemicals play?
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 15
Topics for discussion
• Crop prospects — 2018/19 and 2019/20
• Domestic market liberalisation — implications for the sector
• Trade — how will it evolve in 2019?
• Can the industry continue to grow in the long term?
• Ethanol and bio-chemicals — do they alter the outlook for Thailand’s sugar export
availability?
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing? 16
Thank You
© LMC International, 2019
All rights reserved
While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation,
any decisions based on them (including those involving investment and planning) are at the client’s own risk.
LMC International can accept no liability regarding information analysis and forecasts contained in this presentation.
© 2019 LMC International. All rights reserved. Thailand – Will it keep growing?