Positive Outlook for Sugar Industry in 2025 as Drought Eases and Exports Increase

The Economic and Business Research Center of Siam Commercial Bank (SCB EIC) projects a strong revenue outlook for Thailand’s sugar industry in 2025, driven by a significant increase in production. This growth is expected to offset the impact of declining sugar prices. For the 2024/25 production year, Thailand’s sugar output is predicted to rise by 20.5% from the previous year, reaching 10.6 million tons. This increase aligns with a projected surge in cane extracting volume to 96.7 million tons, attributed to improved yields per hectare and a recovery in cultivated areas following the easing of drought conditions.

In 2025, the average export price of sugar is expected to decline by 2.8% year-on-year (YOY) to $561.5 per ton, in line with the projected decrease in the raw sugar price, including premiums, that Thai sugar mills typically secure. This benchmark price, which serves as a reference for other sugar factories’ export prices, is anticipated to drop by 3.1% from the previous production season to 23.0 cents per pound. Although global sugar prices are expected to rise from Q4/2024 onward compared to mid-2024 due to a global sugar deficit, they will likely remain lower than the price levels seen in late 2023 and early 2024—the period when prices for the 2023/24 production season were set.

SCB EIC viewed that the growth of the sugar industry in 2025 still faced risks from global economic conditions and extreme weather events. A slowing global economy could dampen worldwide sugar demand. If economic growth falls short of expectations, sugar consumption may expand at a slower pace than anticipated, leading to a sharper decline in export prices.

Meanwhile, climate variability and natural disasters pose additional risks to cane production both in Thailand and globally. If Brazil, the world’s largest sugar producer and exporter, experiences less severe drought conditions than expected, global sugar supply could increase, leading to a sharper decline in export prices. Conversely, if Thailand faces adverse weather conditions during the cane extracting season (December 2024 – April 2025), sugar output may fall short of projections, potentially impacting both domestic supply and exports.

In the upcoming phase, the sugar industry will continue to face challenges from policies and measures promoting the transition to a low-carbon economy, sustainability trends, and growing consumer demand for healthier products. Regulatory measures, such as international trade policies and carbon taxation, are expected to increase operational costs for sugar producers. These factors will require industry players to adapt through improved efficiency, sustainable production practices, and product diversification.

The sustainability megatrend is expected to drive both consumers and industries that use sugar as a raw material to place greater emphasis on environmental, social, and governance (ESG) considerations in the future. At the same time, the health-conscious movement is likely to encourage consumers to shift toward sugar-free or reduced-sugar products, leading to a potential decline in overall sugar demand.

Competition in the Sugar Industry in 2025

SCB EIC indicated that the Thai sugar industry faced significant barriers to entry, resulting in a market that was concentrated among a few major players. The industry is heavily regulated by the government, with strict conditions for those wishing to produce and sell sugar. For instance, new sugar mills must be located at least 50 kilometers away from existing licensed sugar factories, and they must ensure that at least 50% of their factory capacity is filled with cane supplied to the mill. These stringent requirements make it difficult for new entrants to compete, keeping market share concentrated within established operators. This regulatory framework aims to ensure market stability, but it also limits competition and innovation, which may impact the industry’s overall growth and adaptability to shifting market trends. Additionally, foreign investors wishing to enter the Thai sugar industry must obtain approval from the Cabinet, and any sugar imports also require government authorization. This regulatory framework shields domestic sugar producers from competition both from foreign players and new entrants.

In the 2023/24 production year, there were 57 sugar mills in operation. (One more mill is expected to open in the 2024/25 production year). Notably, more than 75% of these mills, or 43 mills, are operated by 13 corporate groups, while the remaining 14 mills are independent. This concentration of mills under a few corporate groups further reinforces the market dominance of established players and limits the potential for new competitors to emerge, particularly in a regulated industry like sugar production in Thailand.

In the 2023/24 production year, the top five sugar producers in Thailand collectively accounted for approximately 54% of the total sugar production market share. The breakdown of market share is as follows: Mitr Phol Group – 23.9%, TRR Group – 9.1%, Korat Group – 8.9%, Tama Ka (KSL Group) – 6.4%, and Thai Ekakarn (KTIS Group) – 5.8%. Meanwhile, Khonburi Sugar (KBS) and Buriram Sugar (BRR) held 4.6% and 3.1% market share, respectively. This concentration of market share in the hands of a few large players further emphasizes the dominance of the leading corporate groups in the Thai sugar industry.

SCB EIC viewed that, currently, the sugar industry in Thailand had production capacity that exceeded the available domestic cane supply, leading to intense competition among producers to secure as much cane as possible for their mills. This competition is crucial for reducing production costs per unit. The intensity of this competition depends largely on the annual cane yield, which can fluctuate. In the most recent production year, cane yields decreased significantly, particularly in the Central and Northern regions. This shortage in supply has intensified the competition among sugar mills, as they scramble to source enough cane to meet their production needs.

One of the strategies employed by sugar producers to secure cane, aside from signing forward contracts with cane growers, is to offer higher purchasing prices than the minimum price set by the government. While this approach helps secure the necessary supply of cane, it comes with its drawbacks. Combined with lower sugar and by-product yields, this strategy can lead to a reduction in profit margins for sugar mills, as the higher cost of acquiring cane adds financial pressure while the output remains lower than expected.

According to data from sugar producers listed on the stock exchange, in the first nine months of 2024 (January to September), net profit and net profit margin declined by 19.1% YOY and 0.8 percentage points, respectively. However, the increased cane yield expected in the 2024/25 production year is likely to reduce competition for cane supply. As a result, sugar and by-product production will rise, which is expected to yield a positive impact on the profitability of sugar producers.