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Published August 29, 2014, 10:43 AM

Thailand plans to grow more sugar, swell global supply

Thailand plans to boost the amount of land it uses to grow sugarcane, potentially increasing refined sugar output in the world’s second-biggest exporter of the sweetener by around 10 percent, a government official said.

By: Apornrath Phoonphongphiphat, Reuters

BANGKOK — Thailand plans to boost the amount of land it uses to grow sugarcane, potentially increasing refined sugar output in the world’s second-biggest exporter of the sweetener by around 10 percent, a government official said.

Increased Thai production would drag on benchmark global sugar prices, already struggling near seven-month lows as a supply glut floods markets.

The military government in the Southeast Asian nation wants to increase farmland dedicated to sugarcane by 800,000 rai (316,000 acres) from around 9.5 million rai, said Somsak Suwattiga, secretary-general of the Office of Cane and Sugar Board. The “rai” is a unit of measurement commonly used in Thailand.

That would boost refined sugar production by 800,000 to 1 million metric tons, from the around 10 million metric tons the OCSB forecasts for the 2014 to ’15 crop year. The body oversees Thailand’s sugar industry.

“The plan is likely to be approved by the end of this year, and we could start growing more sugar immediately in the 2015/16 crop,” Somsak told Reuters.

The government would turn over more state-owned land to agriculture as part of the increase, as well as asking some farmers to switch crops.

The country’s large rural population is a major influence on Thai politics, with governments keen to curry its support. The failure of a rice subsidy scheme was a major factor in the downfall of former prime minister Yingluck Shinawatra.

“There are 20 millers, mostly located in the impoverished northern region, that are happy to run at full capacity to help absorb rising cane output,” Somsak said. “There’s no need to build any new sugar factories.”

He played down concerns that it could be difficult to sell more sweetener into an oversupplied market, saying that fundamental demand in Asia was strong.

The International Sugar Organization said on Tuesday that the global sugar surplus was seen at 1.3 million metric tons in 2014 to ’15, down from a 4 million metric tons in 2013 to ’14 as consumption picks up.

Thailand, the world’s second biggest sugar exporter after Brazil, produced a record 11.3 million metric tons of sugar in its 2013 to ’14 crop because of good weather.

That has left it with millions of tons of unshipped sugar, forcing sellers to offer Thai raw sugar at prices below New York futures.

The last time Thai raw sugar traded at discounts to New York futures was in 2009.

The OCSB’s prediction for 2014 to ’15 refined sugar production of around 10 million metric tons is slightly higher than trader and industry official forecasts of 9.5 million metric tons.

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