Sugar Mills in Thailand Battle Strengthening Baht as Prices Drop

Sugar revenue for millers in Thailand, the world’s second-biggest exporter, is falling faster than shipments as the strengthening baht erodes incomes and prices for the commodity extend declines.

Export revenue from sugar fell 34 percent to 7.97 billion baht ($270 million) in March from a year earlier while shipments dropped 24 percent, data from the Ministry of Commerce show. The baht climbed to 28.56 to the dollar on April 19, the strongest level since a devaluation in July 1997. It was 29.20 a dollar today. Sugar is heading for a third year of declines, which would mean the longest slump since 1992.

“Our export income has fallen by around 10 percent from the beginning of the year as the local currency climbed,” said Piromsak Sasunee, chief executive officer of Thai Sugar Trading Corp. in Bangkok, the country’s biggest exporter. “Export volume is barely affected by the baht strength but our income in baht term reduces significantly.”

A strengthening baht is more likely to affect export revenue than shipments because producers in Thailand can’t use their cane to make other products, according to brokerage Newedge Group. In Brazil, the world’s biggest exporter, producers use cane to make sugar and ethanol.

“The Thais don’t have a big option to make ethanol for the internal market like in Brazil, so the baht weakness or strength will only help or hurt the bottom line of the mills and spur more or less investment in the longer term,” said Michael McDougall, head of the Brazil desk at Newedge.

March Shipments

Millers in Thailand shipped 593,114 metric tons last month, down from 785,036 tons a year earlier, Commerce data show. Exports fell partly because millers are holding back as prices decline, McDougall said from New York. Raw sugar futures traded in New York are down 11 percent this year.

Thailand’s sugar output may total 10 million tons in the 2012-2013 crop year that started in November compared with 10.24 million tons a year earlier, Sirivuthi Siamphakdee, vice president of Thai Sugar Millers Corp., said on April 18.

Sugar revenue for Thailand millers may fall even more as producers have started to sell their output, according to McDougall. Thailand’s sugar for loading from May to July was at a premium of 0.9 cent to 1.1 cent a pound over New York raw sugar futures as of April 22, down 0.25 cent from a week earlier, Green Pool Commodity Specialists Pty. said.

“Their sliding physical premiums suggest they are throwing in the towel,” McDougall said.

To contact the reporters on this story: Isis Almeida in London at Supunnabul Suwannakij in Bangkok at

To contact the editor responsible for this story: Claudia Carpenter at

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