A pilot auction to stabilize the sugar market
A pilot auction for sugar import quotas was proposed to help curb soaring prices in the domestic market, amid the elevated demand.
On September 7, 2016, an auction on the right to import 85,000 tonnes of sugar under Vietnam’s World Trade Organisation (WTO) commitment will take place at the Ministry of Industry and Trade (MoIT) headquarters in Hanoi.
The auction aims to find a corporate entity to import 40,000 tonnes of raw sugar and 45,000 tonnes of refined sugar to feed domestic production. Under current regulations, the bidders must be those directly engaged in using sugar for production or using raw sugar for refined sugar production. The bid winners are also banned from sale or transfer of the quotas.
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According to the MoIT, with sugar prices in the domestic market staying at a high level and speculation running rampant, they decided to organise this auction to offset sugar shortfall and restore domestic sugar prices to a reasonable level.
According to chairman of Vietnam Sugarcane and Sugar Association (VSSA), Pham Quoc Doanh, a 10% decrease in the domestic sugarcane output has led to a shortfall of about 200,000 tonnes in annual supply levels. Complicating matters is a jump in the demand of about 100,000 tonnes.
Sugarcane quality has also reportedly fallen, as the average commercial cane sugar (CCS) ratio of raw materials supplied to processing factories stood at 9.64 in recent measures, against the 10.2 measured the previous season.
According to Hanoi-based state-owned Sugar Corporation 1, importing sugar will help balance the supply and demand in the domestic market, as the current demand for sugar from confectionery businesses has been soaring in preparation for the upcoming Mid-Autumn Festival and year-end market needs.
The Ministry of Agriculture and Rural Development has confirmed that sugar prices have been on the rise consistently from early 2016 to the present. From February to April of this year, prices inched up 10-%-15% compared to early in the season, and jumped 20%-30% compared to a year before.
Lasting drought, salt intrusion, a shift from planting sugar to other more profitable crops, and speculation were all cited to blame for local sugar prices hitting such high levels.
Doanh said that due to shortfall in the domestic supply, some businesses had to cancel contracts they had signed at the year’s beginning, after sugar trading firms refused to deliver their products, saying that they had failed to buy sufficient supplies from sugar factories.
“Firms using sugar and sugar producers told us that there was a speculative mentality among sugar trading firms”, a source from the VSSA revealed.
The VSSA, therefore, applauded the MoIT’s intention in holding the sugar import quota sale auction, saying that it could help limit speculation and stabilise the market.
