Overview of how Thailand's sugar industry works
By Jon Fernquest
Thailand's
sugar industry is the topic in this week's business focus
section of the Bangkok Post. The section includes four
articles and an infographic: 1. Infographic overview of whole system (See infographic).
2. Introduction to problems in Thailand's sugar industry (Read article)
3. How the quota system works (Read article below)
4. Free trade makes it difficult to fix prices (Read article article)
5. Challenges to ethanol production from outside the country (Read article)
Today's article begins after the vocabulary.
(Photo on right is of sugar crystals)
sugar - technically:
"edible crystalline substances, mainly sucrose, lactose, and fructose
characterized by a sweet flavor. In food, sugar almost exclusively
refers to sucrose, which primarily comes from sugar cane and sugar
beet. Other sugars are used in industrial food preparation, but are
usually known by more specific names—glucose, fructose or fruit sugar,
high fructose corn syrup, etc.Excessive consumption of sucrose has been
associated with increased incidences of type 2 diabetes, obesity and
tooth decay.Currently, Brazil has the highest per capita production of
sugar" (See Wikipedia)
crystal (noun) - a piece of a substance with a many-sided shape and usually clear too (See photo to right and Wikipedia)
crystalline (adjective) - looks like a crystal
infographic - information presented in the form of pictures or diagram rather than words (See Wikipedia)
quota - a limited number allowed, of things or people
quota system - in business a system of limiting how much can be produced or sold in cerain markets
free trade - a system of buying and selling goods between countries (international trade) where taxes on imports (tariffs) are low or zero (See Wikipedia)
ethanol - fuel for cars and trucks that comes from sugar, sweet potatoes and other crops (See Wikipedia)
crystal (noun) - a piece of a substance with a many-sided shape and usually clear too (See photo to right and Wikipedia)
crystalline (adjective) - looks like a crystal
infographic - information presented in the form of pictures or diagram rather than words (See Wikipedia)
quota - a limited number allowed, of things or people
quota system - in business a system of limiting how much can be produced or sold in cerain markets
free trade - a system of buying and selling goods between countries (international trade) where taxes on imports (tariffs) are low or zero (See Wikipedia)
ethanol - fuel for cars and trucks that comes from sugar, sweet potatoes and other crops (See Wikipedia)
Economics
BUSINESS FOCUS
How the system works
12/07/2010The 70:30 revenue-sharing system that underpins the local sugar industry requires clear information on sources of revenue. Domestic and export quotas are allocated by the Cane and Sugar Board, and all stakeholders in the industry have input into the decisions.
At the start of each planting season, the government, millers and farmers jointly estimate how much sugar will be produced and the prices it will fetch on world markets. This is used to calculate the preliminary cane price that millers must pay farmers.
revenue
- income from taxes or business activities รายได้
70:30 revenue-sharing system - when two companies divide between them the money made from selling a product, one company gets 70% and the other 30%
X underpins Y - X is an important part of Y, Y needs part X to continue to exist or to succeed
local - in the area or country that you live in ท้องถิ่น (here: the country of Thailand)
clear - easy to understand
quotas - limits, the greatest amounts possible (that a participant is allowed)
allocated - given for a special purpose or use
stakeholders - anyone affected by a decision, all the people who will benefit or lose from a decision or outcome ผู้ที่ได้รับผลกระทบจากการตัดสินใจ ผู้ได้รับผลประโยชน์ (See glossary)
input - help in the form of ideas, advice, or information, used in a process or in making a decision การสนับสนุน
millers - owners of sugar mills
sugar mill - a factory where sugar is turned into a packaged product that can be sold on store shelves or for export
jointly - done together อย่างร่วมกัน, พร้อมกัน, ด้วยกัน
estimate - to say what you think an amount or value is or will be, either by using available information or by guessing คาดคะเน
fetch - to be sold for a particular amount of money ขายในราคาหนึ่ง
calculate - to determine a number or amount using mathematics คำนวน
preliminary - not final, temporary
70:30 revenue-sharing system - when two companies divide between them the money made from selling a product, one company gets 70% and the other 30%
X underpins Y - X is an important part of Y, Y needs part X to continue to exist or to succeed
local - in the area or country that you live in ท้องถิ่น (here: the country of Thailand)
clear - easy to understand
quotas - limits, the greatest amounts possible (that a participant is allowed)
allocated - given for a special purpose or use
stakeholders - anyone affected by a decision, all the people who will benefit or lose from a decision or outcome ผู้ที่ได้รับผลกระทบจากการตัดสินใจ ผู้ได้รับผลประโยชน์ (See glossary)
input - help in the form of ideas, advice, or information, used in a process or in making a decision การสนับสนุน
millers - owners of sugar mills
sugar mill - a factory where sugar is turned into a packaged product that can be sold on store shelves or for export
jointly - done together อย่างร่วมกัน, พร้อมกัน, ด้วยกัน
estimate - to say what you think an amount or value is or will be, either by using available information or by guessing คาดคะเน
fetch - to be sold for a particular amount of money ขายในราคาหนึ่ง
calculate - to determine a number or amount using mathematics คำนวน
preliminary - not final, temporary
After the crop season ends in October, all parties review actual output and global prices, with the so-called Quota B the most important factor, and settle on a final cane price. If the final price is higher than the preliminary price, millers pay farmers the difference. If the final price is lower, farmers don't have to pay anything back and the government will reimburse the millers.
parties
- people or companies entering into a business arrangement or deal
actual - real; existing in fact จริง
global - throughout the world ทั่วโลก
factor - a fact or situation which influences the result of something ปัจจัย
settle - to reach a decision or an agreement about something แก้ปัญหา (here: agree on price)
reimburse - pay money back to someone for expenses they had to pay
actual - real; existing in fact จริง
global - throughout the world ทั่วโลก
factor - a fact or situation which influences the result of something ปัจจัย
settle - to reach a decision or an agreement about something แก้ปัญหา (here: agree on price)
reimburse - pay money back to someone for expenses they had to pay
There are three quotas under which sugar is sold and their use is strictly controlled.
Quota A: Domestic refined sugar is allocated at 2.2 million tonnes. It is calculated based on economic growth and demand of industries and households each year. Millers have to sell this amount at a regulated wholesale price.
Quota B: Raw sugar exported for price benchmarking, allocated at 800,000 tonnes. The Thai Cane and Sugar Corp, which manages the sales, comprises representatives of planters, government agencies and sugar mills who set pricing. The average price from these sales determines the final cane price payable to farmers.
Quota C: Export sugar, allocated at around 3.8 million tonnes and managed by sugar mills, which are free to export it without any state involvement. This includes both raw and refined sugar left over from quotas A and B.
Sugar mills are not allowed to sell export sugar at a lower price than the price fixed for Quota B
strictly
- completely อย่างเข้มงวด
demand - the need and desire to buy goods and services by households and businesses
households - families or groups of people living together (economics treats this as a unit that makes decisions)
wholesale - buying and selling goods in large quantities, during distribution before the goods reach the store การขายส่ง
planters - farmers who plant and grow crows เกษตรกรผู้ปลูกพืชไร่
state - government รัฐ
raw - not cooked or processed
raw sugar - sugar that has not been processed in a sugar mill and turned into a product yet
refined sugar - sugar that has been processed and packaged in a sugar mill so it can be sold in stores
demand - the need and desire to buy goods and services by households and businesses
households - families or groups of people living together (economics treats this as a unit that makes decisions)
wholesale - buying and selling goods in large quantities, during distribution before the goods reach the store การขายส่ง
planters - farmers who plant and grow crows เกษตรกรผู้ปลูกพืชไร่
state - government รัฐ
raw - not cooked or processed
raw sugar - sugar that has not been processed in a sugar mill and turned into a product yet
refined sugar - sugar that has been processed and packaged in a sugar mill so it can be sold in stores
(Source: Bangkok Post, BUSINESS FOCUS, Sugar cultivation in ThailandHow the system works, 12/07/2010, link)
