Demand for industrial sugar in Vietnam in F&B (cont and end)

Reducing sugarcane supply and factories has a strong impact on domestic sugar production, while the demand for sugar from food and beverage processing factories is increasing. Although the domestic sugar industry is flexibly supported by import policies from the state, it has not really met the consumption volume, leading to the situation of smuggled sugar still being quite common. Citing data from the report "Assessment of Industrial Sugar Demand in Vietnam from a Survey of Food Processing Factories" (*), the government and relevant parties need to take specific measures to promote the protection of domestic sugar production. 

The problem of industrial sugar supply and demand imbalance

According to the report of the Vietnam Sugarcane & Sugar Association in August 2023, in the 2022/2023 sugarcane crop, the country's cumulative output from the beginning of the season has crushed 9.6 million tons of sugarcane and produced 935 tons of sugar of all kinds. Compared to the 2021/22 sugarcane crushing season, sugarcane crushing output reached 128% and sugar output reached 125%. Ending inventory in 2022 is about 395 thousand tons. The amount of officially imported sugar by July 2023 is 452 thousand tons. Thus, the domestic sugar supply including imports until July 2023 is 1.76 million tons.

Meanwhile, domestic sugar consumption is estimated at 2.24 million tons. Meanwhile, based on the population living standard survey, the research team estimates household consumption to be about 429 thousand tons. Consumption for the food and beverage processing industry is about 1.8 million tons. In addition, the amount of sugar exported for the whole year according to estimates by the Sugarcane Association is about 147 thousand tons. Thus, the country's total demand for cane sugar in 2023 (including exports) is estimated at about 2.39 million tons. 

Thus, to make up for the sugar shortage from now until the end of the year, Vietnam needs to import about 625 thousand tons.

Estimated supply and demand for cane sugar in 2023 (calculated according to the number of imports as of August 2023. Source: Report on sugarcane production situation of the Sugarcane & Sugar Association in May 2023; General Department of Customs; Calculated according to GSO's VHLSS population living standard survey; Estimates from the survey of food processing enterprises from 40 surveyed enterprises - estimated to account for 21% of industrial sugar consumption, Estimated total industrial sugar consumption is about 1.8 million tons).

The current situation of domestic sugar supply and demand is facing the risk of shortage due to the continuous decline in sugar production. Meanwhile, the demand for industrial sugar is increasing. The recent sugar shortage has helped domestic sugar cane and sugar prices to stabilize. Sugarcane farmers have better selling prices but consumer demand is lacking. 

Preferential import quotas are limited and cannot meet demand, and import taxes on official sugar outside the quota are high, causing difficulties for import businesses when world sugar prices increase. This situation leads to an increase in sugar smuggling through countries such as Laos and Cambodia at lower prices due to no requirement to pay taxes and there is no strong competition with domestically produced sugar and officially imported sugar. This shows that in order to ensure the demand for industrial sugar and stabilize sugar prices for consumers, to limit smuggled imports, it is necessary to have flexible trade policies, especially in the sugar import quota policy.

In the short term, there needs to be reasonable adjustments to increase import quotas and continue to implement the solution of assigning import tariff quotas through transparent public auction in order to maintain the balance of supply and demand and stabilize the domestic sugar price. In addition, there is a need for research to evaluate the overall sugar industry to develop scenarios to determine the optimal amount of import quota. This is in order to ensure the balance of supply and demand while still stabilizing sugarcane prices for farmers and evaluate and research effective policies to support sugarcane-growing households and processing factories. Invest in research into new varieties with high yield and quality to help reduce production costs and improve the competitiveness of Vietnamese sugar products. Continue to apply trade remedies to imported sugar products in accordance with international commitments. 

In addition, to protect domestic sugar production, it is necessary to strengthen solutions to detect, arrest, and strictly handle illegal trading and transportation, fraudulent trade in sugar products, and strict management of import forms for export production and origin of goods to stabilize and healthily develop the domestic sugar market. 

* About the report "Assessment of Industrial Sugar Demand in Vietnam from Survey of Food Processing Factories", by MSc. Vu Huy Phuc - Institute of Policy and Strategy for Agricultural and Rural Development:

DATA USED IN THE REPORT

The report uses two main data sources:

(i) Secondary data: includes data on area, sugarcane output, sugar output of factories, export and import status, consumer demand of people...) collected from reports of domestic units such as: the Ministry of Agriculture and Rural Development, General Statistics Office, General Department of Customs, Vietnam Sugarcane & Sugar Association (VSSA), Ministry of Industry and Trade...). 

(ii) Primary data: including data on the current status and demand for industrial sugar from a survey of 45 food and beverage processing factories

(iii) Expert consultation: Interview sugar industry experts to assess the difficulties, prospects, and solutions of the sugar industry in the coming period.

REFERENCES

IPSARD, 2015, Value chain analysis and international competitiveness of some agricultural products of Vietnam

Sugarcane & Sugar Association, 2022, Sugarcane Production Report 2022

Sugarcane & Sugar Association, 2023, Sugar production report for the period of May 2023, August 2023

Tay Ninh Provincial National Assembly Delegation, 2023, Voters' recommendations on some sugar supply and demand issues for the Ministry of Industry and Trade.