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8 May 2008

Industry

THB5 Sugar Price Increase: Impacting Consumers and Industry (Business Brief No.2157)

On April 29, 2008, the Cabinet resolved to increase the retail sugar price by another THB5/kilogram (or THB5.35 inclusive of VAT) to ease the losses to sugarcane farmers in the wake of plunging sugarcane prices during the 2007/08 crop year. This move will result in additional income of around THB10 billion per year[1] for the Cane and Sugar Fund, and will thus help them gradually repay their debts owed to the Bank for Agriculture and Agricultural Cooperatives (BAAC). Currently, the Fund owes THB12.462 billion to BAAC and plans to borrow another THB12.370 billion to boost sugarcane prices by THB169 per ton. This would put the sugarcane price paid to farmers at THB807 per ton. Meanwhile, the Fund will become more financially secure with this sugar price increase, which will enhance stability within the sugarcane and sugar industry during price slumps.

On the downside, however, this move will put a heavier burden on consumers, estimated at around THB105 more per head in their annual expenditures. At the same time, impacts to sugar-based industries will be felt to varying degrees, depending on their volume of sugar consumption. KASIKORN RESEARCH CENTER (KResearch) forecasts that among the main casualties will be manufacturers of confectionary, carbonated drinks and diary products where the cost of sugar to total costs stands at 20.7 percent, 12.5 percent and 7.6 percent, respectively.



[1] Domestic sugar sale volume of 2 million tons X THB5 increase in sugar price

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