1

Sawasdee

Presentation prepared by Mr Ransit Hiangrat of the Thai Sugar Millers Corporation, Malcolm Wallis and Dr Pit Pruksathorn of Sutech Engineering.

Thai Sugar Millers Corporation Limited

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• Secretariat Office of 3 Thai Sugar Millers Associations

• Information center for Thai sugar millers

• Coordinate with Thai millers and other stakeholders on the development of Thai sugar industry

• Promote R&D to enhance the industry’s competitiveness

• Promote technical and business cooperation with foreign partners

• Support freer and fairer sugar trade in the global market

Sutech Engineering Limited

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• A member of the Sutech Group of Companies established in 1974

• To assist the development of the Thai Sugar Industry

• Sutech Engineering established in 1990

• Design and manufacture of equipment dedicated to sugar production

• Now a major supplier of equipment and complete sugar plants in Asia and developing outside of Asia

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“Thailand Sugar Industry”

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The Sugar Trading World

Net exporters

Net importers

Net ex/importers

5

Sugar Exporting Countries

6

Thailand: 2nd largest exporter after Brazil

Brazil +25

EU -2

Thailand +7-8

Australia +3

Asia: 8-10 mln.tons deficit

7

THAILAND: THE ONLY NET SUGAR EXPORTER IN ASIA

Source: LMC Sugar and Sweeteners Market Report, 7

Thailand is the only net exporting country in the ASEAN region

Net

exporters

Self-

sufficient

countries

Net

importers

No local

production

Thailand Myanmar

Philippines

Vietnam

Indonesia

Cambodia

Laos

Malaysia

Brunei

Singapore

8

4 Mills

20 Mills

19 Mills

9 Mills

Source: Ministry of Industry

Thai sugar mills

• No of mills : 52 Total capacity: 1 mln.tcd • Cane areas: 49 provinces 10 mln.rais (1.6 mln.ha)

• Rules for establishing a new mill: - No less than 50 kms between new

and existing mills - Cane crushed at least 50% of the

total capacity in the 1st year of operation

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Cane Zoning

area

• Areas within 50 km. radius

• Areas within 100 km. radius

10

Cane areas

11

105.96 11.30

1

3

5

7

9

11

10

20

30

40

50

60

70

80

90

100

110

Cane production Sugar production

Cane(M.tons) Sugar(M.tons)

2014/15 Crop Year: record production

12

Groups of Thai Mills (2015 crop year)

13

2.30

1.60

0.99 0.91

0.64 0.64 0.56

0.53 0.44

0.40 0.33

0.25

1.70

0.00

0.50

1.00

1.50

2.00

2.50

0.00

5.00

10.00

15.00

20.00

25.00

Cane Sugar

Cane(Mln.tons) Sugar(Mln.tons)

Cane areas by region

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2012/13 2013/14 2014/15 Change

East 0.45 0.42 0.44 +0.02

North 2.03 2.17 2.19 +0.02

Central 2.71 2.62 2.69 +0.07

Northeast 3.65 4.02 4.09 +0.07

Total area 8.84 9.23 9.41 +0.39

Unit: Mln.rais (6.25 rais/ha.)

0.44

2.19

2.69

4.09

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15*

East North Central N.East

Major crops areas

Year 2014 Year 2015*

Rubber

In season rice

Off season rice

Cassava

Maize

60.54 mln.rais

15.06 mln.rais

8.43 mln.rais

7.29 mln.rais

18.22 mln.rais

55.95 mln.rais

8.49 mln.rais

8.96 mln.rais

7.24 mln.rais

18.85 mln.rais

- 7.58 %

-43.61 %

6.29 %

-0.70 %

3.41 %

Palm oil 4.15 mln.rais 4.40 mln.rais 6.09 %

Cane 8.77 mln.rais 9.08 mln.rais 3.53 %

Source: Office of Agricultural Economics

Remarks * Estimation (Nov 2015)

%

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• Generates > 6 bln. USD annually

• Create income and employment for > 300,000 families • >1 mln people are involved in sugar and related sectors

• 31 Cane Growers Associations

• 3 Sugar Millers Associations

Sugar Industry Contribution to Thailand’s Economy

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ที่มา : Accenture

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No. of Farmers (mln. families)

Rice

Rubber

Cassava

Corn

Sugarcane

Palm oil

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1,898,441

887,512

679,840

640,050 527,069

503,636

491,005

382,849

284,986

143,439

104,898

1,434,300

Thai sugar markets in 2015 (tons)

Indonesia

China

Myanmar

Japan

S.Korea

Malaysia

Cambodia

Vietnam

Taiwan

Singapore

Laos

Others

2015/16 crop • Long delay of monsoon (only one more month left) • Drought spread all over the country • 4 major dams with less than 20% of the available

water holding capacity filled • Govt. warning: Stop growing off-season rice

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2015/16 Daily Crushing Capacity (TCD) As of 24 Jan 2016 (61 days)

0

200000

400000

600000

800000

1000000

12000001 6

11

16

21

26

31

36

41

46

51

56

61

66

71

76

81

86

91

96

101

106

111

116

121

126

131

136

141

146

151

156

161

166

2013/14

2014/15

2015/16

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Cane and Sugar Production as of 24 Jan 2016 (60 days)

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Cane crushed

(mln.t) 2013/14 2014/15 2015/16 % change

North 9.77 12.20 9.91 -18.79

Central 11.86 13.47 10.15 -24.60

East 1.41 2.54 2.22 -12.30

N. East 16.92 21.15 19.86 - 6.10

Total 39.96 49.35 42.14 -14.60

Sugar

production

(mln.t)

2013/14 2014/15 2015/16 % change

North 0.90 1.14 0.85 -25.07

Central 1.13 1.21 0.86 -28.80

East 0.14 0.24 0.19 -19.93

N. East 1.72 2.19 1.95 -10.84

Total 3.89 4.78 3.86 -19.23

Cane and Sugar Act B.E. 2527 (A.D.1984)

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Sugar Cane: Natural and more than just sugar

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Thai Cane and Sugar Industry

Cane : 106 mln.t

Sugar : 11.3 mln.t

51 mills

Ethanol

Cane and Sugar Act B.E. 2527 (1984)

Revenue sharing Growers/Millers

70:30

Cane and Sugar Fund

Local consumption: 2.45 mln.t

Gasohol (E10, 20, 85)

Revenue: 190,000 Mln.B Molasses 4.7 mln.t

2014/15

Growers : 300,000 families

Export 8 mln.t

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Cane for sugar

Ethanol Not governed by the Law

Cane and Sugar Act B.E. 2527 (A.D. 1984)

Cane and Sugar Board

Administrative Committee

Cane Committee Sugar Committee

Grower: 9

Millers: 7

Govt.: 5

Growers: 5

Millers: 4

Govt: 3

Person: 1

Cane and Sugar Fund

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Grower: 3

Millers: 3

Govt.: 6

Grower: 5

Millers: 5

Govt.: 5

Grower: 6

Millers: 4

Govt.: 4

Thailand Sugar Industry

Cane and Sugar Act B.E. 2527 (1984)

Cornerstones of the current policy

• Revenue sharing between growers/millers: 70:30 - Sugar and molasses included in the share - Ethanol and other by-products not governed by the Law

• Secure supply of sugar for local consumption

• Stability of local prices

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Thailand Sugar Industry

Cane and Sugar Act B.E. 2527 (1984)

Cornerstones of the current policy

• Production quota allocation for each mill

Quota A: Whites and refined for local consumption

Ex-mill price determined by growers and millers

Retail ceiling prices set by Ministry of Commerce

Quota B: Raws for export by TCSC (800,000 tons)

to set reference export prices for revenue calculation

Quota C: Raws, whites and refined for freely export by mills

(Total production - Quota A - Quota B = Quota C)

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Revenue Sharing System

Sugar

Quota B Quota A Quota C

Cane...

Net proceed

Cane and Sugar Fund

Growers

70%

Millers

30%

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Challenges: Retail prices in Thailand: the lowest in Asia

Retail prices/kg

Thailand 23.50 Baht ($US 0.65)

Laos

27 to 40 Baht.

Cambodia

Vietnam

Myanmar

Indonesia

Philippines

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Challenges

• Climate change • Less than 20% of cane areas irrigated • Low farm productivity • El Nino effect until 2016/17

Unsustainable cane supply Mills’ undercapacity

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Farm productivity • Short ratoon cycle

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Crop yr Cane Production Cane Area Cane yield Sugar yield

(Mln.t) (Mln.ha) (t/ha) (Kg./ton cane

2007/08 73.308 1.00 73.57 105.57

2008/09 66.463 1.03 64.65 108.12

2009/10 68.480 1.08 63.49 101.10

2010/11 95.360 1.30 73.36 101.33

2011/12 97.979 1.33 73.72 104.63

2012/13 100.000 1.41 70.69 100.27

2013/14 103.660 1.48 70.16 108.95

2014/15 105.956 1.53 68.9 106.66

Cane and sugar

Cane Sugar Sugar yield CCS

Ave. cane prices

Mln.ton Mln.ton Kg/ton cane Baht/ton

2003/04 64.48 7.01 108.71 12.09 567.82

2004/05 47.81 5.11 106.94 12.17 744.69

2005/06 46.69 4.78 102.48 11.61 929.43

2006/07 63.80 6.72 105.33 11.91 782.93

2007/08 73.31 7.74 105.57 12.09 756.61

2008/09 66.46 7.19 108.12 12.28 1,043.47

2009/10 68.48 6.92 101.10 11.58 1,094.31

2010/11 95.36 9.66 101.33 11.78 1,152.88

2011/12 97.98 10.25 104.63 12.04 1,206.44

2012/13 100.00 10.03 100.27 11.65 1,098.33

2013/14 103.66 11.29 108.95 12.56 1,105.20

2014/15 105.96 11.31 106.66 12.23 968.26

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Climate change

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ความเสี่ยงหมายเลข 1 ของโลกคือ “Water crises” 33

Thailand: most affected by extreme weather

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Thailand water situation

0

1000

2000

3000

4000

5000

6000

7000

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ปรมิาณน า้ไหลเขา้ (ลา้น ลบ

.ม

.)

เฉลีย่

ปี ปี 2556

ปี 2555

ปี 2557

ปี 2553

ปี 2558

0

5,000

10,000

15,000

20,000

Water resources

Outflow plan

Actual outflow

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2011/12 2012/13 2013/14 2014/15

Cubic meters

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Challenges: World Economy

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เกษตรบริบทใหม่ ก้าวไกลด้วยนวัตกรรม

ทีม่า: World Economic Outlook, October 2015, IMF

%

World US Europe China Japan ASEAN

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Brazil

Australia

ไทย

ส่วนเกนิ ++

World sugar balance

World prices

Funds + Speculation

+ Distorted markets

India

Thailand

Challenges: Low world prices

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Challenges: Cane logistics

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Challenges: sugar logistics

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Challenges: Aging population Shortage of labor

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Thailand population structure

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Changing structure of Thailand population

2005 2010 2015 2020 2025 2030 2035

% Growth No of population

% Growth Millions

42

• Rising cane input cost

• Lack of labor

• Small scale farm size:

unsuitable for mechanization

Challenges

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Challenges: Small scale farms unsuitable for mechanization

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Promote the use of farm mechanization

• Soft loans for cane harvesters and farm machinery

(2010-2015: 6.0 bln.baht/600 cane harvesters)

Financial sources:

- Bank of Agriculture & Cooperatives

- Cane and Sugar Fund

45

Farm productivity • Short ratoon cycle

46

Crop yr Cane Production Cane Area Cane yield Sugar yield

(Mln.t) (Mln.ha) (t/ha) (Kg./ton cane

2007/08 73.308 1.00 73.57 105.57

2008/09 66.463 1.03 64.65 108.12

2009/10 68.480 1.08 63.49 101.10

2010/11 95.360 1.30 73.36 101.33

2011/12 97.979 1.33 73.72 104.63

2012/13 100.000 1.41 70.69 100.27

2013/14 103.660 1.48 70.16 108.95

2014/15 105.956 1.53 68.9 106.66

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Diversification

Challenges

Existing Companies Installed cap.

(Liters/day) Raw mat.

1. Thai Ethanol 100,000- Molasses 2. Thai Alcohol 200,000- Molasses 3. Thai Agro Energy 150,000- Molasses 4. Thai Ethanol Power 130,000- Cassava 5. Khon Khan Alcohol 150,000- Molasses 6. Mitrphol Biofuel (Chaiyabhum) 500,000- Molasses 7. E 85 250,000- Molasses 8. KI Ethanol 100,000- Molasses 9. Mitrphol Biofuel (Kalasin) 230,000- Molasses 10. Akarat Pattana* 230,000- Molasses 11.Thai Roong Ruang Energy 120,000- Molasses 12. Ratburi Ethanol Co., Ltd. 150,000- Cassava 13. ES Power Co., Ltd.* 150,000- Molasses 14. Mae sord Co., Ltd.* 230,000- Cane 15. Sapthip Co., Ltd. 200,000- Cassava 16. Tai ping Ethanol Co., Ltd. 150,000- Cassava 17. P.S.C. Starch Product Plc. 150,000- Cassava 18. Mitrphol Biofuel (Danchang) 200,000- Molasses 19. Khonkaen Alcohol (Bo Ploy) 200,000- Molasses

20. Thai Agro Energy 2 200,000- Molasses

21. Ubol Bio Ethanol 400,000- Cassava

21 plants 4,190,000

21 Existing projects (4.19 ML/D) 14 molasses-based 1 cane-based 6 cassava-based

Ethanol Plants

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Ethanol in 2015

Target ethanol demand (MLPD)

2.96 6.2 9.0

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

Start E20 Sell Gasohol

E10 nationwide

Ban on 91 (1 Jan 2013)

Related policy

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85 10

Ethanol Policy

• No mandate on blending

• Ban on ULG 91

• Regional biofuel hub

Regular ULG 95

Target year

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2007 2008 2009 2010 2011 2012 2013 2014 2015

Daily Ethanol Consumption (Mln.L/D)

• Ban on ULG 91 in Jan 2013

• Rising demand of E20 and E85

• Current demand rises above 3.5 mln./D

Challenges: Low oil prices

50

ASEAN Thailand

Population 598 mln. 67 mln.

Sugar production

17 mln.tons 10 mln.tons

Sugar imports 5-6 mln.tons 0.0 mln.tons

Sugar balance Net

importers Net exporter

Challenges: ASEAN Economic Community (AEC)

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• Economic linkage: business and trade cooperation

• Land link under Greater Mekong Sub-region

Challenges for the Thai sugar industry

52

ASEAN-GMS connectivity Great Mekong Sub-region

East West Economic Corridor

53

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“Thank you”

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“Khorp khun khrap”