Fearing that the domestic market will suffer, Vietnamese sugar producers have this week cancelled many large export orders. The move reveals a complete circle for the industry’s fortunes, which only a few months ago meant producers had to lower prices to undercut the competition and sell off surplus sugar mountains.
The sales director of Nagarjuna Int’l Ltd, Duong Thi To Chau, explained the situation: “We have to reject many foreign orders as we have already contracted our stocks with domestic customers.”
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The reason for the dramatic turnaround appears to rest with measures taken by the sugar producers to avoid sitting on any more surplus. While Nagarjuna’s production rose by 10% this year, contracted orders were signed to guarantee that the sugar output would be sold until November. Bien Hoa Sugar Company became Vietnam’s first official sugar exporter when 9000 tons of RE sugar were shipped to the Philippines a few months ago, swiftly following by an agreement to supply a further 16000 tons. Sugar producers Bourbon-Tay Ninh, part of the French diversified conglomerate Groupe Bourbon, signed away 2,000 tonnes to Cambodia. The Lam Son Sugar Company also agreed to ship 12000 tons at “reasonable prices” to an ASEAN member country.
Maintaining export agreements may be good for the future of the sugar industry, but it does not appear to be the most economically viable option given the present situation. Khanh Hoi Sugar Company sent 10000 tons to an ASEAN member country at a price that was “very close to production cost”. Acting director Vo Quang Hoang said, “we could not even get small profits.”
He added that the government should provide financial support to enable companies to fulfil their export obligations and attract new contracts: “Subsidies will enable us to ship 10000-15000 tons more.”
The Ministry of Agriculture and Rural Development believes that sugar will reach its export destinations in good quantities. An official has forecast that “sugar exports will make big inroads into the stocks reserved… and factories will therefore have to buy unprocessed sugar from small establishments to refine to ensure sufficient supplies for the domestic market.”
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