Thailand, the world's second-biggest exporter of sugar, is tightening rules on domestic trade as surging world prices trigger smuggling of Thai sugar to neighbouring countries, traders and officials said on Tuesday. Lured by high world prices, local traders are doing business with smugglers who sell the sweetener in neighbouring Laos and Cambodia, where cane crops and crushing technology are poor and the cost of importing white sugar from Thailand is growing.
"We have ample supplies for domestic consumption and exports, but what we are concerned about is hoarding and smuggling," Vatchari Vimooktayon, deputy director of the internal trade department, told Reuters. Thailand, Asia's biggest sugar exporter and the world's largest after Brazil, sets aside 2 million tonnes of sugar for domestic consumption of total annual production of 6-7 million tonnes, Vatchari said, adding that smuggling puts a squeeze on supplies.
There is no official data on how much sugar is smuggled. Traders told Reuters the sweetener is carried out of Thailand by locals who cross borders without declaring their goods, hauling the sugar in carefully concealed bags. The trend has gathered steam as world prices rise. In New York, raw sugar for October delivery hit a 28-1/2 year high last week at 24.85 cents per lb, driving the price of white, or refined, sugar traded in London to a record.
By Monday, raw sugar traded in New York had pulled back, with the October contract trading at 21.60 cents per lb. Thailand's government controls the local sugar trade tightly. Domestic retail sugar prices are set at 23.50 baht (69.1 cents) per kg. Anyone who sells above that faces fines or even jail. But prices in neighbouring Cambodia have shot up to as high as 34 baht ($1) per kg, one trader said. "That's high enough to attract local traders to smuggle," he added.
Thailand's Ministry of Commerce will meet millers, traders and wholesalers this week in a bid to find ways to halt smuggling after complaints that supplies had become so tight that local retailers were no longer putting 1-kg bags on shelves, Vatchari said. "We will keep sugar trading along borders under tighter surveillance in a bid to prevent smuggling and to make sure that we have ample sugar for domestic consumption," said a custom official at Sa Kaeo province bordering Cambodia.
Thailand was estimated to have around 500,000 tonnes of sugar left for domestic consumption before the start of the 2009/10 crushing season in November, while consumption stood at around 150,000 tonnes per month. In the 2009/10 crop, Thailand is expected to produce around 7.6 million tonnes of sugar from around 72 million to 76 million tonnes of cane, according to the Office of Cane and Sugar Board (OCSB).