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Thailand's cane crushing slows as government tightens regulation on crop burning

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Thailand's cane crushing slows as government tightens regulation on crop burning

Highlights

Average cane crush per day at 478,472 mt, down 38% from previous season

Burned cane amounts to 19.6% of total cane bought by Thai mills

Supply tightness for prompt shipment months expected

Singapore — Thailand's cane crush is seeing a slow start for the October 2020-September 2021 marketing season, as the Thai government ramped up efforts to improve air quality by reducing sugarcane burning, trade sources said.

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The country's cumulative crush volume as of Dec. 31 was lower by 56% at 10.18 million mt compared with the same period last season. The average cane crush per day for December was 478,472 mt, down by 38% from last year.

Market sources familiar with the matter said that government regulations require sugar millers to procure at least 80% of fresh sugar cane from farmers for the 2020/2021 marketing season. In addition, the government will issue subsidies to millers that purchase fresh cane.

Farmers often choose to burn cane as it is less laborious and time-consuming for harvest compared to manually cutting off the cane leaves.

Another factor for the slow crush pace was that over ten mills in central and northern Thailand did not start crushing operations in December. However, sources said that the cane crush for these mills would only have started in the first week of January.

"Producers and farmers would be penalized if they do not follow such rules as the government has been very strict on air pollution," a Thai-based source said.

According to a crushing report seen by Platts as of Dec. 31, 2020, burned sugarcane amounted to 19.6%, or 1.99 million mt, and fresh sugarcane comprised of 80.4%, or 8.19 million mt, of the total sugarcane purchased by Thai sugar millers.

This is in stark contrast to the same period last year where burned cane contributed to 46.7%, or 10.75 million mt, while fresh cane made up only 53.26%, or 12.25 million mt.

Thai cane crushing season typically begins in early-to-mid December and ends in May. However, Thai cane crush over the past two seasons have been shortened to February amid lack of cane availability as the country faces dry weather condition.

The slower pace of crushing has resulted in supply tightness for available sugar in the prompt month, thus supporting Thai cash premiums for January and February shipment cargoes.

S&P Global Platts assessed Thai HiPol raw sugar for January loading cargoes at a premium of 182 points over the New York No. 11 March futures on Jan. 6, compared to 162 points over the March futures for March-May 15 shipment cargoes.

While such a regulation would result in a slower crop harvest, several sources noted that the positive impact of the burned cane regulation would increase sucrose recovery while avoiding environmental pollution.

"It is good that we managed to keep burnt cane at 20%. By keeping the burnt cane volume low, it will be good for the sugar yield," a Thai-producer source said.