Challenges Time of Thailand’s Cane and Sugar Industries in 2020

This year’s drought crisis results in a total of 74.89 million tons of cane for extraction, a number less than the previous season when 43% of cane or 130.97 million tons in total were sent to refineries. What Thai farmers are now facing is high capital costs of cane growing and cane products’ quality which is risky of getting burnt, besides the Covid-19 pandemic which is currently slowing down global economy. Previously, prices of raw sugar under speculation in New York at the beginning of this year reached 14% per pound before falling down to 11-12% per pound. Such is a real challenge to Thailand’s cane and sugar industries. Therefore, governmental agencies, sugar factories and farmers themselves must find a way for effective risk management in terms of capital costs or water resources management to cope with drought.

Mr. Siriwuth Siempakdee, deputy chair of TSMC’s executive board

Mr. Siriwuth Siempakdee, deputy chair of TSMC’s executive board, revealed that, to tackle the above-mentioned challenges, planning and management on production costs should be done effectively, from planting cane in a farm, providing sufficient water resources for cane plantation to face with the present drought that is threatening Thai industries. The situation is affecting the number and quality of products for extraction at sugar mills, resulting in poor quality of sugar per cane but high capital costs in total.

In terms of factories themselves, Mr. Siriwuth said that sugar extraction needed to enhance its effectiveness as much as possible so that farmers will gain high profits. For the production season of 2019/2020, farmers and factories must work together to manage production costs effectively as no more than 100 million tons of cane are expected for extraction whereas there were 130 million tons of cane for extraction last year. At the same time, quality of cane products is risky from cane burning problems as many farmers suffered from high capital costs in terms of harvesting fresh cane and sending it to factories. Although, in the past, many sugar mills tried to send their tractors to help farmers to harvest cane, the assistance was insufficient. Therefore, governmental agencies should help them, namely providing low-interest rate cane cutting tractors to sugar mills so that they send them to help farmers later.

According to analyses of Siam Commercial Bank’s EIC, to alleviate impact of drought for the short term, governmental agencies have to help farmers in terms of providing knowledge on plantation, production factors and technology for plantation to enable farmers to modify their agricultural approaches with different situations on water in their area. Besides, encouraging farmers to get their products for insurance more may probably reduce impact to their income though not entirely.

Nevertheless, sustainable management of water resources in the periods of drought and flooding is still under high concerns. Apart from water resources development, increasing irrigation areas and water supply, other issues should be considered for effective use of water for agriculture. They can be appropriate planning of plant growing as well as promoting Agritech in which automatic use of water is introduced. Also, a meteorological safety alarm system will help concerned organizations and farmers regarding water management and proper plant growing.

The logistic system in terms of cane collecting to sugar mills is an important process for farmer as sweetness of cane corresponds to cane quality. For instance, Mitr Phol Group considers the system a management of transport from the time when cane is in a farm to the time it arrives to a factory. Such time, called cut to crush, should be controlled to no more than 8 hours. Normally, the time lasts between 4 and 6 hours after the harvest so that raw materials have high quality in sugar production and farmers earn more from selling fresh cane which has high sweetness as an added value.

The logistic system introduced by Mitr Phol Group is called Haulout Bin in which a cane tractor is used to transport cane along with a cane cutting tractor. Both will transport cut cane to another truck parked outside the farm until the vehicle is fully loaded. The truck will then carry the cane to a factory. The new approach was favored 5 years ago. Even now, it is being used as it takes little time. In other countries like Brazil and Australia, the approach is used as it is widely acceptable and effective thanks to quick transport. Also, sweetness in cane is not lost before cane arrives to the factory. However, it is undeniable that some factories had to accept burnt cane for production from time to time.

Source: mitrpholmodernfarm.com
The hand sanitizer is being high demand because of COVID-19 and need to use a large quantity of molasses based sugarcane.

The above-mentioned problem is an important issue governmental agencies, factory owners and farmers should work together to solve because it affects sweetness of cane and efficiency in sugar extraction from cane itself. However, despite high capital costs in terms of cutting cane in a farm, labor shortage and expensive cane cutting tractors, the recent sugar extraction period of 2019/2020 has seen more fresh cane for extraction of up to 37.70 million tons or 50.34% of all cane while burnt cane for extraction is up to 37.18 million tons or 49.65%. This is the first year that governmental agencies, sugar mills and farmers have worked collaboratively to reduce the number of burnt cane. Therefore, in the next season of 2020/2021, such issue should be closely monitored.

The Covid-19 pandemic is another negative factor affecting Thailand’s cane and sugar industries. Fortunately, it enables the country to stay in a situation when local sugar consumption is not as much tight as someone was concerned with. Sugar products have lowered more than expected, affecting some factories which already bought sugar in advance. However, the director general of the Cane and Sugar Commission of Thailand Mr. Ekapat Wangsuwan confirmed that nobody should worry as the government already allocated sugar for consumption in 2019/2020. There are 25 sacks of sugar or 2.5 million tons plus another 2 million tons in storage which are sufficient for consumption in the country.

Production of ethanol at sugar mills is becoming urgent for alcohol gel for handwash and Covid-19 disinfectant. Some factories accepted that decreasing amount of cane products resulted in few molasses, an ingredient for ethanol production. On the contrary, need for alcohol in medical treatment is surprisingly high. The Minister of Energy Mr. Sontirat Sontijirawong mentioned that Thailand was at present in need of more alcohol for medical purposes as it could be used as 70% alcohol for disinfectant and prevent the Covid-19. In this regard, ethanol manufacturers can make use of additional 1 million liters of ethanol since the machine used to produce it can reach 80-90% from the typical 60-70%. Therefore, farmers of cane and cassava can gain benefits as demand is higher. If cane and cassava were used to produced E20, it would be better because demand is currently at 2 million liters per day. Now, some factories are asking for more ethanol production of up to 500,000 liters per day.

In summary, given various challenges for Thailand’s cane and sugar industries during the current production season of 2020/2021, governmental agencies, private sectors and farmers as well as stakeholders of the industry need to monitor the situation closely to analyze a proper way regarding agriculture in drought crisis as well as water resources management. Even logistic systems must be considered for effective transport of cane to factories. Such are beneficial for cane industries in the country. Besides, the situation about the viral pandemic which is affecting Thailand’s sugar export needs close monitoring apart from global sugar prices which are now extremely low. This involves the Thai Baht value as a major indicator. All are for maintaining Thailand’s economic values and all cane farmers.