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Apr 29, 2008 (Bangkok Post - McClatchy-Tribune Information Services via COMTEX) -- The cabinet today will consider a proposal to raise the sugar price paid to mills by five baht a kilogramme to cover the higher costs incurred throughout the entire supply chain, according to Rachai Chusilkul, the secretary-general of the Federation of Thai Sugarcane Planters.

The Office of the Cane and Sugar Board (OCSB) yesterday made the proposal to Industry Minister Suwit Khunkitti.

The ultimate impact on retail sugar prices, which are about 40 percent lower than in other countries, is not known. The increase "could be applied all at once or in steps", Mr Rachai said.

The proposal is in response to Mr Suwit's commitment last week to pay sugarcane farmers 807 baht a tonne. The minister later asked the OCSB to review the prices across the industry.

Earlier this year, farmers received 600 baht per tonne for their sugarcane. But more expensive fuel, fertilisers and labour costs have added to their production costs.

If the cabinet agrees at its meeting today to pay the farmers 807 baht per tonne, the additional 207 baht per tonne would come from the Bank for Agriculture and Agricultural Co-operatives and the sugar mills.

But at the same time, Mr Rachai said, the Sugar and Cane Fund's debt burden would more than double to 24.33 billion baht.

"Consequently, something has to be done to address this concern. Therefore, the board has agreed that the sugar price needs to be raised," he said.

He added the board believed that increasing retail sugar prices would help improve the whole supply chain -- by raising farmers' incomes while alleviating the fund's burden.

"I think the adjustment is reasonable. Other farm commodities have seen their prices shoot up. If we want to keep this industry alive, we'll have to improve the cane farmers' income.

"In addition, our domestic sugar price is quite low compared to the levels in neighbouring countries, where consumers pay around 35 baht per kilogramme."

Currently, the ex-factory sugar price is between 14 and 15 baht per kilogramme. If the cabinet approves a price increase, it would hit 19 to 20 baht.

Based on current domestic stocks of 10 million sacks or one billion kilogrammes, the five-baht hike would add five billion baht more revenue for traders.

However, a source in the sugar industry warned that the price increase would lead to a dispute between the mills and the farmers, who will ask for a bigger share of the additional income.

"Farmers will most likely ask for more to help repay their debts instead of allowing the sugar mills to enjoy the windfall," the source said.

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Vichaya Pitsuwan

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