Thailand's sugar industry is poised for growth, according to a recent forecast by the SCB Economic Intelligence Center (EIC), which predicts that industry revenue will experience substantial expansion by 2025. This optimism is fueled by an anticipated increase in sugar production, which is expected to reach 10.6 million tons, following a projected rise in sugarcane yields to 96.7 million tons.

Such expansion would help offset expected declines in sugar prices.

As a major agricultural processing sector, the sugar industry in Thailand plays a crucial role, closely tied to upstream farmers due to its reliance on sugarcane supply.

Approximately 74.9% of the sugar produced is exported, with 2023 export values reaching $3.493 billion, accounting for roughly 1.2% of Thailand's total exports.

Notable export markets include Indonesia, the Philippines, and South Korea, with Thailand ranking as the world's third-largest sugar exporter behind Brazil and India, capturing 9.0% of the global market share.

Domestically, sugar that is not exported is sold to household consumers and industrial manufacturers.

The domestic sugar market was valued at THB 49,635 million in 2023, excluding the value from by-products used in other industries.

The past three years have presented challenges for the sugar industry, primarily due to erratic weather conditions.

In the 2023/2024 production year, sugar output decreased by 20.1% from the previous cycle due to severe droughts affecting cane-growing areas.

However, the impact on overall industry revenue was mitigated by an increase in sugar prices, with raw sugar export prices rising by 17.9% year-on-year.

Looking ahead, SCB EIC forecasts a potential 20.5% annual increase in sugar production for 2024/2025 as cane yield per hectare and cultivated areas recover from previous droughts.

However, export sugar prices are expected to decline by 2.8% year-on-year to $561.5 per ton aligning with a 3.1% decrease in the prices of raw sugar per pound.

For 2025, the value of sugar exports is anticipated to rise by 28.7% year-on-year, reaching $3.6 billion, while export volumes are expected to increase significantly by 32.4% year-on-year to 6.5 million tons.

Simultaneously, Thailand's domestic sugar market is projected to grow modestly by 1.0% year-on-year to THB 56 billion, driven by an uptick in domestic consumption linked to overall economic growth.

Nonetheless, the industry's growth is not without challenges.

Global economic conditions and extreme weather remain significant risks.

A slower-than-expected global economic recovery could dampen global sugar demand, impacting export prices.

Additionally, climate variability and natural disasters could affect sugarcane yields globally.

If Brazil, the largest sugar producer and exporter, experiences less severe drought than expected, sugar export prices may decrease further.

Moreover, the sector faces long-term challenges from sustainable economic policies and consumer health trends, including potential increases in operational costs due to international trade measures and carbon taxes.

The rising sustainability trend may influence consumer and industrial preferences, leading to a shift towards environmentally and socially responsible products, while health-conscious consumers may reduce sugar intake.

The analysis by Dr. Kiattisak Khamsi is available in full from SCB EIC.