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Published on January 11, 2008

Vibul Panitvong, vice chairman of the Three Sugar Associations' Coordinating Committee, said that

to address the twin problems of the Cane and Sugar Fund's debt and the sugar-cane price, the government should consider encouraging ethanol production under proper management.

"The government should encourage farmers to grow each [year's] crop in an appropriate volume. We already proposed this idea to the Agricultural Economics Office two days ago and we hope our plan will be kindly considered," he said.

Sirivuthi Siamphakdee, chairman of the Thai Ethanol Manufacturing Association, said that if the government has a policy to turn sugar - oriented to export markets in the past - to ethanol, it will not hurt the domestic food industry. On the contrary, farmers could sell their cane at a better price, and the sugar-cane fund would not need to subsidise prices so much.

The eight molasses-based ethanol plants already operating have combined capacity of 1.55 million litres per day, while daily demand has reached 613,000 litres.

The ethanol price this quarter should be Bt17.28 per litre, but it dropped to Bt14 because of tough competition in the domestic market amid weak demand, he said.

The domestic ethanol price is now linked to global ethanol prices, he said.

The government should let the market mechanism determine the demand for ethanol because price control is distorting the market, Sirivuthi added.

Vibul said the final price of sugar cane from this harvest would not go lower than Bt638 per tonne thanks to rising sugar prices in the global market.

He said the primary price of sugar cane in the 2008/2009 season should be Bt800 per tonne and the price would stay at this level or rise until 2010.

The increase in the sugar price is caused by several factors, such as speculation by a big American investor and higher demand for ethanol in every part of the world for alternative fuels, he said.

However, the baht's appreciation has troubled sugar exporters.

If the government did not promote ethanol consumption aggressively, sugar-cane growers would shift to other crops with higher prices, such as cassava. The ethanol plants would end up closing because of oversupply of the fuel ingredient in the market and the shortage of starch feedstock, Vibul added.

Chalida Ekvitthayavechnukul

 The Nation