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Paradox in Vietnam's sugar industry: rising prices amid high inventories

By Bui Hong Nhung   August 24, 2016 | 10:55 am GMT+7

Why is Vietnam paying double the global price for sugar?

Vietnam has about 400,000 tons of sugar stockpiled, but the price remains fixed fairly high, hurting consumers as well as enterprises who need sugar for manufacturing.

Data from the Vietnam Sugarcane and Sugar Association revealed that the country has 416,000 tons of stockpiled sugar, coupled with an import quota of 185,000 tons for this year. This could result in a 200,000 ton surplus, not to mention another 200,000 tons imported illegally from neighboring countries like Laos and Cambodia.

Though sugar supplies are plentiful, prices on the domestic market are continuing to rise.

 A kilogram of sugar was priced at VND15,000 ($0.7) in April, but that figure has jumped 33 percent to some VND20,000 ($0.9) at present.

The price of Vietnamese sugar is almost double that in Thailand ($0.5 per kilogram) and more than double the price of the global market ($0.4 per kilogram).

Nguyen Van Loc, the director of Loc Hang Trading Consultant Company, attributed the growth in sugar prices to decreasing output caused by the prolonged drought. He said that many sugar processors have raised purchasing prices of sugarcane to encourage farmers to improve their produce. As a result, these processors added on this adjustment to compensate for higher production costs.

However, economists said that the problem mainly comes from sugar traders, who are keeping sugar in stock to wait for further price hikes.

In response to the situation, the Ministry of Industry and Trade has sent a proposal to the Prime Minister, asking for an additional 200,000 tons of sugar imports to bring down sugar prices.

Prime Minister Nguyen Xuan Phuc approved the plan to import 100,000 tons of sugar in addition to the quota of 85,000 tons under the country's commitment to the World Trade Organization.

But neither of the two quotas have been reached so far this year.

Vietnam has about 280,000 hectares (692,000 acres) of sugarcane plantations this year, producing some 18 million tons of raw materials, down eight percent against last year. Plantations in the Mekong Delta have shrunk by 20-30 percent due to the historic drought and saltwater intrusion.

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