1-1

CHAPTER 1
Structure of Sugar industry in Thailand
SYNOPSIS

1. Background of Thai sugar industry.

2. Structure and sugar cane production situation.
3. Climatic conditions for growing sugar cane.
4. Sources for growing sugar cane in Thailand.
5. Sugar cane planted in Thailand.
6. Season for planting sugar cane.
7. Produce of sugar cane.
8. Cost price for producing sugar cane.
9. Structure and market condition of sugar cane.
10. Price of buying sugar cane by the mills.
11. System for buying and selling sugar cane.
12. Structure and condition in producing sugar.
13. Production efficiency.
14. Allocation of production capability.
15. Grouping together in producing.
16. Volume of production and production trends.
17. Structure and condition of domestic sugar.
18. The structure of the sugar market.
19. Sugar trader countries and Thai sugar residue.
20. Group of import countries,
21. Group of export countries.

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CHAPTER 1
Structure of Sugar industry in Thailand

Background of the Thai sugar industry

Thailand has planted sugar for many centuries, but production from sugar was
in the form of sugar-cane juice or syrup only. Over 100 years ago, some Chinese
constructed a sugar mill on the Nakorn Chaisri River, using local sugar-cane species:
honey sugar cane; red sugar cane; and chicken-leg sugar cane. It finally closed the
business, as the sugar produced was merely red sugar. In 1927, there was an attempt
by Field Marshal Chao Phya Surasakmontri to construct a new sugar mill, but it was not
successful.
In

1937, a sugar mill was constructed for the first time in Koh Ka District,

Lampang Province. It was called the Lampang Thai Sugar Mill and was equipped with
modern machinery. Construction was completed in 1938. Chicken-leg sugar cane was
used as the raw material for producing sugar but was insufficient to produce sugar, as
this species produces a low percentage of sugar. Insufficient land for planting and low
yield/acre was obtained. Before 1959, Thailand produced lower volumes of sugar than
domestically consumed. We had to import 20,000-50,000 MT. of sugar a year.
Later, another sugar mill was constructed in Uttradit Province. Chicken-leg sugar
cane was again used as the raw material. Again, there was insufficient bagasse fiber to
use as fuel. Wood also had to be used. Heat from the steam machinery caused
burdens. New species of sugar cane for producing sugar was sought during this period.
When the Government promoted the search for new and improved species of
sugar-cane, which produced a high percentage of sugar, there was contemporaneous
technological advancement. This enabled construction of another sugar-mill.

1-3
Later, more sugar mills were constructed and there is now a total of 42 sugar mills.
Sugar produced has exceeded the volume used for domestic consumption, so since
1970 Thailand has been able to export this surplus. Distribution of sugar mills has
extended to Chonburi Province, Rayong, Kanchanaburi, Supanburi, Prachuabkirikan
and Petchburi Provinces.

A. Structure and suaar-cane producing situation

Whether the sugar produced is good quality or not is dependent upon the
quality of the sugar cane. If the quality is good and there is a high sugar content, sugar
production per MT will give high volume too. This will reduce the production cost of
sugar. Although improvement of technology is presently progressing

and there is

research to improve machinery and production equipment, sugar-cane has a weak

point. By nature, sugar cane will transform into other species, as it becomes 3-4 years
old.

Climatic conditions for growing sugar-cane

Two factors - sunlight and temperature - are important to sugar-cane. Sugar
cane normally grows in tropical and warm zones with a strong sun, so that cane grows
and can produce glucose sugar, stored in the trunk. The average temperature for the
whole year must be a minimum of 23-24C. The volume of rainfall should be between
1,500-2,000 mm. a year, but irrigation should also be provided. This helps the sugar
cane when there is shortage of rain or when there is insufficient dampness in the soil.
Sugar-cane is unable to endure typhoon storms or cyclones because these cause the
sugar-cane to collapse.

1-4

Sources for growing sugar-cane in Thailand .

Northern Region

sugar-cane plantation in Chiengmai

Province, Lampoon, Lampang , Uttradit, Sukothai and
Nakornsawan Provinces.

Central Region

sugar-cane in Supanburi,
Rajburi, Nakornpatom, Kanchanaburi,
Petchburi, Angthong, Singburi and
Prachuabkirikan Provinces. These
provinces have recently become the biggest areas
for planting sugar-cane in
Thailand. Presently,
60 % of sugar-cane planted for producing
sugar in Thailand comes from this region.

Eastern Region

sugar-cane in Chonburi and Rayong

Provinces. Sugar-cane grown for producing
red sugar has been planted for more than
20-30 years in this area, until the big-scale
white sugar mills were constructed and
it became the biggest source of sugar
industry in Thailand after World War II.
Now, it has secondary importance
to the Central Region.

Northeastern Region

sugar-cane plantations in Udornthani,

Nakornpanom and Buriram
Provinces. The biggest source of
sugar-cane production is Kumpavapi
and Nongharn Districts and Udornthani
Province.

1-5
Sugar-cane planted in Thailand .
From the 1997 survey, the following species of sugar-cane were planted :
Northern Region

- LT. 4, F.144, Finda Q.83 and Trojan.

Central Region

- F. 140, F.148, F. 154, Finda Q.83 and - F.137

Eastern Region

- F. 134, F. 153, F.148 and Finda.

Northeastern Region

- H. 38-2915, Finda and NCO. 310

Season for planting sugar-cane

Normally,

sugar-cane

planters

in

the Northern, Northeastern and Central

Regions prepare soil for planting the new sugar-cane in the early rainy season, between
May and June, so the soil receives moisture from the rain. Moisture in the soil helps the
sugar cane sprout evenly. Another aspect is that the soil after November-February is
hard, making preparation difficult. Farmers have to wait for rainfall before preparing the
soil. In the Eastern Region, planters like to prepare the soil and plant a new crop in
November-December, by using moisture left in the soil from the rainy season. This
makes sugar-cane sprout for a certain period. The age of sugar cane planted during
November-December to the March-May, will be 4-6 months. The coming Rainy season
will enable the sugar cane to root deeply into the soil and grow. The sugar cane will be
strong and can endure dryness when there is a shortage of rain, which may occur
during July-September. Agriculturists in this region regard planting during this period
more suitable than planting in May, as it saves the expense of mowing weeds and it is
easy to find species.
The sugar cane growing period usually about 10-12 months. It is then cut and
transported to the mills. If cut before 10 months, the sweetness will be insufficient. Rain
must stop for about 15-30 days to get high sweetness.

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If sugar-cane is cut while there is still some rain, sweetness will be low. The
Ministry of Industry controls the period for crushing sugar cane by not allowing the mills
to crush before the 1st of November. They can crush until the end of May or June each
year. The production year is different from the calendar year, as the production year
begins in November and ends in October the following year.

Produce of sugar-cane
The volume of sugar cane produced appears to be uncertain.

It changes from

high to low depending upon the price of sugar-cane and climatic conditions. The price
of sugar-cane keeps changing. It the price of sugar-cane is high, sugar-cane planters
will extend the area for planting the following year. When the price falls, the area for
planting is reduced the following year, as seen on Table # 1.1

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Table # 1.1 Planting area, volume of production and buying price of sugar-cane

Year of

Planting area

Volume of

Average price

Production

(acres)

sugar-cane (MT)

(Bath/MT)

1981-1982

441,334

2,195,853

118.22

1982-1983

344,982

1,694,533

119.8

1983-1984

452,000

2,387,185

153.98

1984-1985

532,000

3,912,788

117.87

1985-1986

523,000

3,044,850

102.87

1986-1987

361,379

2,534,660

161.18

1987-1988

447,777

2,379,430

203.65

1988-1989

646,243

4,399,067

150.97

1989-1990

738,583

5,102,268

136.22

1990-1991

861,806

6,585,861

144.9

1991-1992

872,494

5,925,566

150.45

1992-1993

1,133,439

9,512,794

179.72

1993-1994

1,616,304

12,694,491

199.64

1994-1995

1,935,253

13,413,442

298.66

1995-1996

2,347,450

19,099,066

301.8

1996-1997

3,118,689

26,094,453

289.25

1997-1998

3,541,096

18,941,209

299.73

Source : Sugar-cane and Sugar-Office for the years from 1981-82 to 1997-98

1-8
In 1981-1982, the area planted with sugar-cane in Thailand was 441,334 Vai. The
volume of sugar cane fed into mills for pressing was 2,195,853 MT. By 1984-1985, the
area of sugar cane had increased to 532,000 rai.

The volume of sugar cane for

pressing was 3,912,788 MT. There was surplus sugar on the market, leading to a great
reduction in price of sugar cane and sugar. This impacted on planting in 1986-1987, as
agriculturists began to reduce planting in production year 1987-1988. There was a
shortage of rain, which damaged much of the sugar cane.
After 1987-1988, the planting area of sugar cane was 447,777 rai and volume of
sugar cane for pressing was 2,379,430 MT. In 1990-1991, the area of sugar-cane had
increased to 646,243 rai, while sugar-cane for

pressing

volume of sugar-cane increased by 85%. In 1990-1991,the

was 4,399,067 MT. The

area of sugar-cane was

861,806 rai, while sugar-cane for pressing was 6,585,861 MT. From the survey of
sugar-cane made in 1991-1992, the area for planting sugar cane was 872,494 rai, while
5,925,566 MT. was pressed. In 1992-1993, both the area for planting and volume
increased to 1,133,439 rai, while up to 9,512,794 MT of sugar-cane was fed in for
pressing. In 1993-1994, 4 new sugar mills opened for production and the area for
planting sugar-cane increased to 1,616,304 rai. In1994-1995, another 4 sugar mills
opened for production and the area for planting sugar-cane increased to 1,935,253
rai. In 1995-1996, the area for planting sugar-cane increased to 2,347,450 rai. In 19961997, it increased by 770,739 rai to 3,118,689 rai and in 1997-1998, the area for planting
increased to 3,541,096 rai.
Cost price for producing sugar-cane
The present cost price of planting sugar cane is high, as agriculturists still lack
correct technology. Increased production is done by extending the planting area.
Improving production methods or improving the sugar-cane species is rare, despite the
fact that improving planting and produce will give a higher production.

At the same

time, cost price can be reduced. After cutting the sugar-cane, the stumps can grow
and can be cut again up to 3 times: the first from cuttings from newly planted

(1 rai = 0.4 acres or 1,600 square meters)

1-9
sugar-cane; then cuts from the stumps. Cost price of sugar cane in newly planted sugar
cane and stumps/stubs of sugar cane should be considered. Important expenditure in
planting sugar-cane can be classified into: cost of preparing soil; cost of planting
expenses; maintenance costs; and other expenses and expenses in cutting and
transporting sugar-cane. The cost price of stumps/stubs sugar cane of will reduce
planted sugar cane by 40%, as there are no expenses for preparing the soil and
planting sugar cane. Expenses for stumps of sugar cane are maintenance costs, cutting
and transporting costs and other expenses. The cost price for planting sugar cane can
be classified as follows: -

1-10
Table # 1.2 Each item of expense for planting sugar cane, in percentage of the total.

Description

Newly

Stump or stub of

Planted sugar-cane

sugar-cane

1. Cost for preparing soil.

10

2. Expenses in connection with

20

planting of sugar-cane
3. Maintenance costs

25

37

4. Other expenses

15

16

5. Cutting and transporting the

30

47

100

100

sugar-cane
Total

Source : Sugar-cane and Sugar-Office for the years from 1987 to 1998

It will be seen that the cost of cutting and transporting sugar-cane is high
compared with total expenses. The second highest cost is maintenance costs, i.e.
the cost for eliminating weeds, cost of fertilizer, wages of labourers applying fertilizer,
cost of other agricultural tools, etc. This is taken From the study made by the Sugar-cane

1-11
Table #1.3 Details of average cost price for planting sugar-cane in Central and Eastern Regions
during production year 1997-1998
UNIT : BAHT

Newly plant

Stub of

sugar-cane

sugar-cane

(Baht)

(Baht)

300

- Cost of sugar-cane species per acre

350

- Labour for planting and cutting

250

- Weeding per acre.

300

300

- Cost of fertilizer per acre.

200

200

- Labour for covering the ridge with

50

50

100

100

50

50

150

150

Description

1. Cost for preparing soil:

- Cost for first and second plough
and making ridge per acre.
2. Expenses for planting.

sugar-cane per acre.

3. Maintenance Cost

earth per acre.

- Cost of agricultural tools and others
per acre.
4. Other expenses :
- Land rent per acre

Source : Seminar Report on Sugar-cane and sugar in Thailand,1997-1998.

(Bangkok: Chulalongkorn University, 1998), pages 186 -187

1-12
Table #1.3 Details of average cost price for planting sugar-cane in central and Eastern Regions
during production year 1997-1998 (continued)
UNIT : BAHT

Description

- 2% interest/year (8 months) per acre

Newly plant

Stub of

sugar-cane

sugar-cane

(Baht)

(Baht)

120

120
(1 acre per 7 MT)

5. Cutting and transporting sugar-cane

(1 acre per 8 MT)
320

280

460

490

Total expense per acre

2,852

1,640

Total expense per 1 MT

356.5

234.28

- Cost for cutting sugar-cane at Baht

40/MT, one acre costs
- Cost for transporting to factory at baht
70/MT, one acre costs

Source : Seminar Report on Sugar-cane and sugar in Thailand ,1997-1998.

(Bangkok: Chulalongkorn University, 1998), pages 186 -187

1-13
Generally, newly planted sugar-cane will be 2 parts of the area. The cost price for
new sugar-cane will be 356.50 baht /MT,
2 parts will be

Cost for stubs of sugar-cane is

3 parts will be

713.00 baht /MT.

234.28 baht /MT,
702.84 baht /MT.

Average cost price/MT. is 713.00-702.84 baht = 283.16 baht /MT

5
B. Structure and market condition of sugar-cane .

The market for raw material or sugar cane is somewhat of a monopoly, as is the
market for buyers, because after planting sugar cane, it has to be sold to the sugar
mills.

Sugar-cane agriculturists are taken advantage of. Although the agriculturists

have grouped together to bargain with the sugar mills, the majority of the sugar-cane
agriculturists still depend on the mills for loans for planting. Sugar-cane producers are
obliged to sell their sugar cane to such mills, which monopolize buying. The sellers are
sugar-cane agriculturist who group together, as:
1. Sugar-cane Agriculturists, Zone 7 Association, This involves sugar-cane
planters in Nakornpathom,

Rajburi, Kanchanaburi, Supanburi

and Ang-Thong. Its

office is located at Thamaka District, Kanchanaburi Province.

2. Sugar-cane agriculturists, Zone 7 Association (Petchburi Province-Pranburi
Branch). Its office is located at Pranburi District, Prachuabkirikan Province.
3. Chonburi Agricultural Occupation Group Association. Its office is located at
Ban-bueng District, Chonburi Province.
4. Rayong Agricultural Association (Ban-Kai Brand). Its office is located at BanKai District, Rayong Province.
5. Sugar-cane Agriculturists, Zone 6 Association. Its office is at Muang District,
Kampaengpetch Province.
6.

Nakornsawan

Agricultural,

Occupation Group Association.

located at Kow-Leow District, Nakornsawan Province.

Its office is

1-14
Sugar-cane Agriculturist Groups which have established big

groups

with

important roles are Agriculturist Group Zone 7 and Chonburi Agricultural Occupation.
They have important roles in bargaining for the buying price of sugar cane with sugar
mills and contacting Government offices to remedy problems and the constraints of the
sugar-cane plantation business.
There are 2 methods of buying used by the mills:
a) buying sugar cane according to weight. The majority buys by weight. This
long-practiced method weighs the sugar cane, then the price is agreed at 300 baht /MT.
The sugar-cane agriculturists will sell at this price, whatever the type of sugar-cane and
whatever its sweetness. Buying by this method results in low quality products and there
is residue, such as the leaf-sheaves of sugar cane, leaves and soil. Sugar-cane
agriculturists are usually not interested in the quality and sweetness of sugar cane,
because they aim only at growth and weight and ignore improving the quality of sugar
cane.
b) buying sugar cane according to quality. This is "Commercial Cane Sugar
(C.C.S.) bought by considering the quality of the sugar cane. This is can be obtained
from examining and measuring sugar juice, then calculating it by using an international
formula. Buying sugar-cane with this method gives justice to both parties, because the
price is according to the sweetness. When sugar-cane has high sweetness, it is sold at
a high price and encourages the sugar-cane agriculturists' interest in improving sugar
cane species, as well as cutting the sugar-cane when it is sufficiently mature to
obtain a good price. Buying through this method is usually done by state enterprise
mills. Of the private mills, only the Mahakhun Sugar Mill in Singburi Province buys sugar
cane through this formula.

1-15

Prices for buying sugar-cane by the mills.

The price of sugar cane moves up and down according to world market prices. If
the price of sugar in the world market moves higher, the mills are glad to buy sugar
cane at a high price, but when the price of sugar drops, the mills try to buy sugar cane
at cheaper prices. At later stages, there is bargaining between the mills and sugar
cane planters. A government official can assist or act as negotiator, enabling sugar
cane planters to sell at a higher price. Although both parties may agree on a price, when
the time comes for actual buying, the price of sugar cane is normally lower than the
agreement made. The sugar mills use their monopolized power in buying the sugar
cane.

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Table # 1.4

Buying price of sugar-cane by sugar factory.

Unit: Baht/MT.

Production Year Average price

Agreed price

1987-1988

203.65

1988-1989

150.97

1989-1990

136.22

1990-1991

144.9

1991-1992

150.45

1992-1993

179.72

183

1993-1994

199.64

212

1994-1995

298.66

300

1995-1996

301.91

300

1996-1997

286.03

300

1997-1998

299.73

300

Source : Sugar-cane and Sugar Office for the years from 1987-88 to 1997-98

1-17

System for buying and selling sugar-cane.

The system for buying and selling sugar cane is different from the buying/selling
of other goods, as sugar mills need sugar cane to be fed at full capacity. They give
loans to sugar planters-called "money for maintaining plantation" to spend for planting.
This arrangement monopolizes the agriculturists sales of their sugar cane to the mills
according to the agreed volume. The mills pay money by installments to the
agriculturists after they have planted sugar-cane. The mill pays a second installment
when the agricultural officer of the mill has examined the plantation. The money which
the mill pays to the agriculturist will be charged at interest not less than 15% a year. The
mill will deduct the money for maintaining the plantation from the cost of sugar cane
after the agriculturist has transported sugar cane to the sugar mill.
Certain mills do not like to use the above method because the agriculturists
who have received money for maintaining plantation do not transport their sugar
cane to the mill after cutting. They instead ask other agriculturists to sell their sugar
cane. This results in a problem of insufficient sugar-cane for pressing by the mills, as
well as the farmer remaining in debt to the mills. Also, the mills do not want contact with
the numerous small-scale planters. They use local middlemen as a quota chief to act as
representative in making contact between planters and the mill. The quota chief is a bigscale agriculturist, who will sign a contract to provide sugar cane to the mill a not lower
than the agreed volume, for which this agriculturist will get payment from the mill. In
collecting sugar-cane for transporting to the mill, the quota chief will deduct an
amount from small-scale planters called cost for Mt head at about 5-10 baht /MT.

1-18

A. Structure and condition in producing sugar.

There are 42 sugar mills in the country for the production year 1997-1998. There
are many more sugar mills being constructed. The existing sugar mills, altogether can
press approximately 240,000 MT, a day. Of these, 22 mills have a pressing capacity
lower than 5,000 MT/day. The majority of the mills produce white sugar. There are only
3 mills which produce pure white sugar. They are the Banpong Sugar Mill, Supanburi
Sugar Mill and Mahakhum Sugar Mill, all located in the Central Region.
The average growth rate of sugar mills in Thailand during production years
1987/88-1996/97 increased by 3.10%, but the growth rate of production capacity or
pressing capacity of sugar-cane has increased during the same period by 25.27%
because the newly constructed mills or the existing mills have increased production
capacity. (See Table # 1.5)

1-19
Table #1.5 Number of sugar factories, sugar-cane squeezing capacity and growth rate.

Production Year

Number of
Factories

Growth rate Capacity in Growth rate

(%)

squeezing

(%)

sugar-cane
(MT/day)
1987-1988

32

24,121

5.97

1988-1989

31

-3.13

31,246

29.54

1989-1990

29

-6.45

37,528

20.11

1990-1991

27

-6.9

41,867

11.56

1991-1992

30

11.11

51,724

23.45

1992-1993

30

66,337

28.25

1993-1994

34

13.33

99,320

49.72

1994-1995

41

20.59

141,194

42.16

1995-1996

42

2.44

184,160

30.43

1996-1997

42

205,146

11.4

1997-1998

43

2.38

245,557

19.7

Source : Sugar-cane and Sugar-Office for the years from 1987-88 to 1997-98
Sugar mills in Thailand belong to both the State enterprise and the private sector,
distributed throughout the various regions of the country. The majority are
located in the Central Region, because most sugar-cane is planted there, This is
illustrated during production year 1996-1997, from 21 sugar mills in the Central Region,
1,548,423 MT, or 69.99% of the Total sugar of country was produced,
there (See Table # 1.6)

1-20
Table # 1.6

Voulme of sugar production and sugar residue for production year 1996-1997

classified by Regions.

Region

Volume of production (MT)

Number of
factories

white sugar Raw sugar

Total

Sugar residue

Northern

64,384

169,518

233,902

128,662

Central

21

429,894

1,118,529

1,548,423

840,877

Eastern

94,583

225,176

319,759

190,248

Northeastern

29,016

81,204

110,220

63,607

42

617,877

1,597,427

2,212,304

1,223394

Total

Source: Sugar-cane and Sugar-Office,1999.

Production efficencv.

The actual pressing of sugar-cane has increased throughout the county.

From a pressing capability of sugar-cane at 24,121.35 MT. during production year 1987/88,
it increased to 203,293.65 MT. in 1997/98. There is an extension of actual pressing
capability of sugar cane between production of sugar. It can be observed that it is at an
uncertain level. At the same time, the average rate of production between production years
1987/88-1997/98 was reduced by 0.37 %. The reason why production is high in a certain year
and low in certain years was due to the quality of the sugar-cane. If sugar-cane has high
sweetness, a high volume of sugar will be produced. (See Table # 1.7)

1-21
Table #1.7 Production capacity and rate of sugar production.

Production

Actual capacity in

Percentage of

Sugar production

Percentage of

Year

pressing

change

per one MT

change

sugar-cane

Sugar-cane

(MT/day)

(Kgs.)

1987-1988

24,121.35

+6.74

79.34

-13.47

1988-1989

31,246.42

+29.54

72.31

-8.86

1989-1990

37,528.15

+20.10

79.70

+10.22

1990-1991

41,864.37

+11.55

80.84

+1.43

1991-1992

51,424.23

+23.55

84.68

+4.75

1992-1993

66,336.69

+28.25

68.16

-19.51

1993-1994

93,320.21

+40.68

72.70

+6.66

1994-1995

137,441.38

+47.28

79.05

+8.73

1995-1996

184,160.44

+33.99

83.96

+6.21

1996-1997

196,202.42

+6.54

84.78

+0.98

1997-1998

203,293.65

+3.61

83.77

-1.19

Average

96,994.48

22.89

79.03

-0.37

Source : Sugar-cane and Sugar-Office for the years from 1987-88 to 1997-98

1-22
Allocation of production capability.
Each year, before the sugar-cane-pressing season, the Ministry of Industry will
allocate the capability of each mill by considering the volume of sugar cane able to be
produced in each region and zone in a year as a criteria. This assesses the production
capability of each mill. In calculating capability, criteria includes the size and rapidity
of a box for pressing (5 rounds second) as a principle for calculating how much sugarcane/day the mill can press and over all in each production season. Each mill will then
be allocated a quantity of sugar cane. At the same time, the Ministry of Industry will
specify a proportion of white and raw sugar to be produced,

based on the principle of

first producing sufficient white sugar for domestic consumption. The rest can be
produced as raw sugar. Any mill that wants to produce a particular type of sugar must
propose its production plan to the Ministry of Industry for permission. The volume of
replacement of production must be in accordance with the proportion and volume
allocated. When the mill has finished pressing the sugar-cane in accordance with
the volume allowed, the allocation is made and it appears that there is some sugar
cane left, it will again be allocated an average, according to the old criteria.

Grouping together in producing.

Due to a crisis of surplus of sugar on the market during 1984-1985, private mills
began to see the importance of grouping to help one another, to remedy problems and
constraints which

occur. In 1984, they jointly established "The Thai Sugar Mills

Association. This had the important objectives of: giving service and assistance to the
member mills in co-ordination with the government and private sectors domestically and
overseas in trading; in technology on sugar; and helping members to remedy problems
of negotiation between members and the relevant circle. After some time of operation,
the members argued amongst themselves. In May 1991, members of the Association
split into 2 parties, competing to reduce the price of sugar and each hoping to
monopolize the sugar market. There was also the important problem of shared benefits.

1-23
They were unable to agree, so separated and applied for registration of a new
association. This was permitted on the 6th of September 1991, under the name of the
"Trading Association for Thai Sugar Producers"
There are 4 main production groups for production year 1997/98: the "Trading
Association for Thai Sugar Producers" with 24 mills including the mills in Nakoparthom
province; the "Thai Sugar Mills Association" with 12 mills, the "State Enterprise" group
with 4 mills; and another independent group comprised of 42 sugar mills.

1-24

Table #1.8

Production groups and sugar factories in the group

Production group and factories in

Location (province)

Volume of sugar

the group

Production
(sacks)

Trading Association Group that produces

Thai sugar.
1. New Kwang Soon Lee

Cholburi

172,972.00

2. New Krung Thai

Kanchanaburi

408,150.00

3. ThaMaka

Kanchanaburi

473,708.00

4. Thanburi (1)

Rajburi

196,405.00

5. Thanburi (2)

Rajburi

127,790.00

6. Ang-vien

Cholburi

336,030.00

Kanchanaburi

495,384.00

8. Mit-phol

Rajburi

559,589.00

9. Mit-siam

Kampaengpetch

491,575.90

10. Mit-kaset

Kanchanaburi

663,867.00

11. NamtanThai

Kanchanaburi

663,985.00

Kampaengpetch

190,988.71

13. Bangpong

Rajburi

569,376.40

14. Saha Thai Roong rucng

Burirum

48,762.00

15. Tawan-awk

Rayong

484,906.00

Prachuabkirikan

288,186.00

Nakomsawan

214,986.00

Rajburi

594,909.00

7. Prachuab Utsahakam

12. Kampaengpetch

16. Pranburi
17. Ruam Phol Utsahakam
18. Rajburi

Source : Sugar-cane and Sugar-Office, Ministry of Industry.

(Summary situation of producing Thai sugar during production year 1997-1998)

1-25

Table #1.8

Production groups and sugar factories in the group, (continued)

Production group and factories in

Location (province)

Volume of sugar
Production

the group

(sacks)
State Enterpries group :
Lampang

178,470.00

Uttradit

208,026.00

3. Supanburi

Supanburi

383,763.00

4. Chonburi

Cholburi

402,324.00

1. SahaRueng

Nakom Panom

34,266.00

2. RermUdom

Udomthani

90,162.00

Rayong

155,624.00

1. Lampang
2. Uttradit

Independent group :

3. Rayong
Total

Source : Sugar-cane and Sugar-Office, Ministry of Industry.

(Summary situation of producing Thai sugar during production year 1997-1998)

8,434,205.01

1-26

Volume of production and production trends.

The volume of sugar production has increased and become an important export
of the country, Thai sugar production is classified into the production of white sugar for
domestic consumption, as specified by the government, the production of raw sugar for
export and pure white sugar for use in relevant industries, i.e. a factory for producing
carbonated water.

Currently, the government has specified that sugar mills in the

country produce 500,000 MT./year of white sugar.

Production of pure white sugar in

Thailand is minimal. In the past, beige colored sugar was produced, but not any more.
It can be seen from the characteristics of production that the increase in the production
of sugar will be to produce raw sugar for export.There is little increase in the production
of white sugar, but there is a rather high increase in producing pure, white sugar
because there is a great increase in the requirement of such sugar for the relevant
industries. (See Table #1.9 and 1.10)

1-27

Table # 1.9

Volume of sugar production in Thailand

Unit: MT
Year of

White sugar

Production

Pure white

Brown Sugar

Raw Sugar

Total

sugar

1987-1988

182,974

595

5,208

188,777

1988-1989

305,986

12,134

318,120

1989-1990

352,707

53,932

406,639

1990-1991

330,534

17,107

184,788

532,429

1991-1992

253,016

14,536

234,223

501,775

1992-1993

371,616

18,293

258,529

648,438

1993-1994

420,532

14,899

487,396

922,827

1994-1995

494,024

17,313

548,991

1,060,328

1995-1996

439,559

40,515

1,123,519

1,603,593

1996-1997

540,651

77,226

1,594,427

2,212,304

Source : Sugar-cane and Sugar-Office for the years from 1987-88 to 1997-98

1-28

Table #1.10 Showing expansion rate for producing various types of sugar.
Unit: Percentage

Expansion rate for

Expansion rate for

Expansion rate for

producing white

producing white

producing white

producing white

fine group sugar.

sugar.

raw sugar.

total sugar.

1987-1988

-17.98

+33.16

-18.77

1988-1989

+67.23

+132.98

+68.52

1989-1990

+15.27

+34.45

+27.83

1990-1991

-13.94

+242.63

+30.93

1991-1992

-15.03

-16.64

+26.83

-5.76

1992-1993

+25.85

+45.87

+10.38

+29.23

1993-1994

-18.55

+13.16

+112.96

+42.33

1994-1995

-16.20

+17.48

+88.53

+14.90

1995-1996

+134.01

-11.02

+12.64

+51.24

1996-1997

+90.61

+23.00

+104.65

+37.96

Average

+33.45

+12.24

+79.92

+23.23

Year of Production Expansion rate for

Source : Sugar-cane and Sugar-Office for the years from 1987-88 to 1997-98

1-29
Sugar residue is an important by-product from producing sugar.
Each year, Thai sugar mills produce a great volume of sugar residue which can earn
extra income. During the years 1993/1994 - 1996/1997 sugar residue produced
increased at an average of 21.04% (See Table #1.11)

Table # 1.11 Showing production of sugar residue and the expansion rate.

Year of production

Production of Sugar sediment (MT)

Expansion rate (percentage)

1987-1988

148,471

-7.65

1988-1989

226,388

79.42

1989-1990

306,163

14.93

1990-1991

387,976

26.72

1991-1992

341,973

-11.86

1992-1993

525,590

53.69

1993-1994

702,391

33.64

1994-1995

678,355

-3.42

1995-1996

909,552

34.08

1996-1997

1,223,394

34.51

1997-1998

947,192

-22.58

Average

585,222

+21.04

Source : Sugar-cane and Sugar-Office for the years from 1987-88 to 1997-98

1-30

B. Structure and condition of domestic sugar

Domestic sugar market.
The domestic sugar market is the market for buying and selling white sugar.
Conditions of the sugar market fluctuate greatly. It is dependent on the volume of sugar
produced within Thailand, as well as the movement of the price of sugar on the world
market.

In addition, government policy has an association with the market.

To

understand the market system, we must fist learn about the structure of the sugar
market.

The Structure of the sugar market.

This is considered according to the category of distributor and the market cycle
within Thailand, as follows:

a) Category of buyer and distributor.

1. A sugar mill is producer and distributor of sugar to wholesale merchants, the
representative/distributor of the sugar mill and various factories that use a great volume
of sugar;
2. Large-scale factories i.e. carbonated water factories, factories for producing
milk and milk products, pharmaceutical factories, etc. are the sources that buy about
18-20% of the volume of white sugar produced in the country;
3. Agents: some sugar mills do not sell their own sugar, but permit agents to
distribute it. This is for convenience, especially for the collection of money;
4. Wholesale merchants: there are many levels. They may buy sugar from the
sugar mill or from an agent of the sugar mill, then distribute small cases to a wholesale
merchant for forwarding to retail merchants;

1-31
5. Small-scale industrial factories are factories which consume a smaller volume
of sugar than the much as big-scale industrial factories. These factories are the various
food-processing factories, which normally buy from wholesale merchants, rather than
buying directly from a sugar mill;
6.

Retail merchants, i.e. general shops. Sometimes they act as wholesale

merchants, but little volume is distributed; and

7.

Consumers

buying

from

general

shops

buy

the

highest

volume,

approximately 70-75% of the total white sugar produced.

Formerly, sugar distributors got entangled with other persons, such as price
speculation merchants, by buying large quantities of white sugar in advance from a
sugar mill and selling that lot of sugar. During normal times, when the price of sugar
does not fluctuate these price speculation merchants gradually fade away. There is also
the Internal Trade Department. At certain times, sugar mills have to sell part of their
sugar to them for distribution to the general public. This latter method was done by the
Internal Trade Department Act itself issuing purchase orders to small-scale shops under
the Internal Trade Department to buy directly from a sugar mill. Such a sugar mill will sell
sugar as specified in such a purchase order,

b) Market cycle.
Sugar from sugar mills sold directly to large-scale factories, that use a great
volume of sugar, will buy and sell in advance. The price is according to the Contract
and Agreement of both parties. Normally, buying/selling will be done around June, after
the mill has stopped production. The buyer must immediately pay a certain amount in
advance and wait for delivery of sugar in after the mill has started production January or
February. By buying in advance, the buyer is able to get a much lower price than the
market price, because the mill wants the money to repair machinery and make use of
that money as circulation capital to support the agriculturists to plant sugar cane. When
the sugar mill has finished producing, sugar is delivered to distributors and wholesalers.
Payment is made both in cash and on credit. The majority is short-term loans.

1 -32

CHART 1.1

Cycle of sugar market

Internal Trade Department---- ^ { Small scale shops under the

Internal Trade Department

Price speculator merchants-

Sugar mill

Distributor-Small-scaledistributor

Wholesale-Retail
merchant merchant

Sugar mill sell to

Big-scale sugar mill

Source : Sugar-Cane and Sugar-Office, 1999.

Small-scale sugar mill sells to.

Consur lers

1-33
Condition of domestic sugar.

The market for white sugar within the country fluctuates, as there is a lack of
definite policy from the Government. Sometimes there is competition to reduce prices
and, in certain cases, the producer and distributor have to cancel business, although
there is little chance of this happening. In most cases, the distributors will group
together and specify the price, causing chaos in the market, because there is little
competition in the sugar industry. The period when the sugar market fluctuates most is
from November to May, the period when the mills open for pressing sugar cane and
producing sugar. There is a high volume of sugar for sale. Old sugar stock is put up for
sale, causing a drop in price. At the same time, price speculating merchants grasp the
opportunity to buy new sugar for stock and to later bring it out for sale when there is a
rise in price. After the sugar mills stop pressing sugar cane and stop producing sugar,
the price gradually goes up. This is dependent on demand and supply. If in any year,
there is low production of sugar, the price will have a higher trend. Hoarding of sugar
by price speculators still exists. Illegal exporting of sugar at provincial borders is another
problem, which causes turbulence in the sugar market in the country. During June to
November, the period when the mills stop operating, there trend towards a higher price.

1-34

c) Structure and condition of Thai sugar market overseas.

Formerly, the sugar industry was an industry established to replace the need to
import sugar. Before changing into a democratic system in 1969, Thailand had to buy
all white sugar from overseas. During the Phya Pahol Polpayuhasena Government, a
sugar mill was constructed and the industry has since been developed until the present
sugar industry has become an export industry of raw sugar.
Although sugar has become an important export which ranks third in the country
and the volume of sugar exported by Thailand exports ranks fifth in the world, the Thai
sugar industry faces a number of problems, as it is an agro-industry. As a commodity,
there is little market stability as the price fluctuates rapidly within a short period, as it is
dependent on the world market. Since 1981, the outlook for exporting sugar has been
bright. There was a shortage of sugar on the world market.

Thailand had surplus

production,
so it was able to export a high volume in the following years. A study of the condition of
the sugar market will be clearer when the following tables are considered.

1-35

Table # 1.12

Showing volume of production, domestic consumption and export

Value of exports of sugar.

Year Volume of sugar

Domestic

Volume of

produced (MT) Consumption Export (MT)

Value

Price of

(Million Baht)

Sugar in world
market (Baht/Kg.)

(MT)
1987

232,411

233,726

16,789

37.0

0.90

1988

188,777

238,804

1989

318,120

324,459

15,795

46.9

1.56

1990

406,640

357,559

52,294

107.3

1.73

1991

532,429

364,680

145,010

330.7

2.08

1992

500,775

312,302

426,808

1,252.0

3.41

1993

648,438

362,316

258,294

1,086.2

3.34

1994

922,826

382,298

420,241

3,533.5

13.37

1995

1,060,329

400,000

584,988

5,223.9

9.15

1996

1,603,592

430,000

1,081,627

6,614.6

5.2

1997

2,212,304

500,000

1,654,610

7,445.0

4.5

1998

1,561,725

609,619

1,009,620

3,871.0

3.83

Source : Sugar-cane and Sugar-Office for the years from 1987 to 1998

1-36
From Table # 1,12, It is seen that the volume of sugar production continually
increased especially after 1994. The volume of sugar produced in the country in 1996
doubled the volume produced in 1991, from 532,429 MT. to 1,603,592 MT. At the same
time, there was some increase in domestic consumption, because of population
increase and higher consumer demand. Putting the amount together, it is less than 50%
of sugar produced in each year (Table #1.12). The rest of production for export
increased in volume every year.

Sugar trader countries and Thai sugar residue.

Important countries for exports of sugar were the, U.S.A., Malaysia and South
Korea. Malaysia, Japan and South Korea remain important markets. The U.S.A. does not
buy sugar from Thailand any more. In 1997, Thailand exported 41.18% of the total
exports of sugar to the Republic of China, 38.23% to Japan and 10.55% to Malaysia.
Important export markets for sugar residue are Japan, South Korea, the
Netherlands and England.

In 1997, 46.54%, 25.41% and 13.80% of sugar residue was

sent to Japan, South Korea and the Netherlands, respectively

Exporting sugar before 1995 was through the Sugar Industry of Thailand Co. Ltd.
This organization found overseas markets, but there was a problem of inefficient
administration. At the end of 1994, the Government permitted to more than one
company to export sugar. Various sugar mills have joined together and established
another company. The 2 companies which export sugar are:
1. The Thai Sugar Trading Co. Ltd. Shareholders are 22 sugar mills, having
approximately 60% the production capacity of the total produce of the country, with a
long-term Contract for export with 4 Japanese companies for a period of 5 years. It
began in 1994 and ended in 1998 at 120,000 MT/year in volume.

1-37
2. The Sugar Industry of Thailand Co. Ltd. delivered sugar to M. Gologez Co. Ltd.
and Goke Brothers Co. Ltd. for 4 years, from 1995-1998, at 300,000 Long Ton/year.
The calculation country cost of sugar delivered to the contract party will, on
average, begin on the 16th day of the month, 2 months before delivery. This counts and
includes the 15th day of the following month. 2 sterling/Long Ton is to be deducted. The
rest will be sugar for short-term export, depending on the agreement made.
In 1994, there was a shortage of sugar on the world market. The price became
higher, on the world market in 1991-93 costing 2.08 baht/kg. 3.41 baht/kg. and 4.34
baht/kg., respectively. In 1994, the price went as high as 13.37 baht/Kg.
(See Table# 1.12). This was due to:

Group of import countries.

Sugar production in Europe in 1994 decreased 9.0 million tons due to
dry climatic conditions, while the demand was 10.5 million/tons.
2. In the U.S.A. some 80,000 MT of sugar production in Louisianna State was
storm damaged in 1994.
3. Russia, a producer of sugar from beet root and sweet carrot, experienced
problems of epidemic and drought, which reduced production from its target by 2.0
million MT.

1-38

Groups of export countries.

Important sugar exporting countries are Cuba, Brazil, Australia, South Africa,
Phlippines, Thailand, Argentina, etc.

These account for some 50% or more of total

world exports. Although these countries had higher production in 1992, it was reduced
by local consumption, which kept increasing, as most of those countries were classified
as developing countries. The population growth rate is high and certain countries are
unable to produce according to their set target. Sugar production has increased at a
reduced rate, as seen from Table #1.13.

1-39

Table # 1.13

Year

Production and consumption of world sugar.

Production

World consumption

Stock

(Million MT)
1992

73.23

75.37

16.94

1993

76.79

77.26

15.95

1994

80.30

80.01

16.01

1995

79.60

77.53

17.58

1996

82.81

80.12

20.76

1997

87.02

83.17

25.44

1998

93.56

86.57

30.62

1999

92.16

89.97

32.02

Source : F.O.LIGHT'S INTERNATIONAL sugar report, world sugar balances

1992/1993

1998/1998 December 14, 1999. Page 9.

1-40

In 1994 about 80,299 million MT. of sugar was produced was and about 80.011
million MT. consumed, so the price of sugar climbed. This was good for Thailand,
because, in 1994, sugar production increased greatly, as there was a big extension of
sugar planting.

922,826 MT. was produced, while domestic consumption was only

382,298 MT. Exports were 420,241 MT, not including the sugar smuggled out of the
country. In 1994, sugar exports earnings were some 3,433.5 baht million, twice as high
as 1993.