VOV interviewed Ha Huu Phai, Secretary General of the Vietnam Sugar Association about the problem.

”It is a fact that sugarcane is a very important input that keeps sugar mills operating. If farmers are forced to sell at low prices, they will sooner or later stop growing sugarcane, and switch to other crops of higher value. Consequently, mills will lack raw materials to process!

In my opinion the best solution to the problem is to ensure a “win-win” situation. If we look back to the past, the same thing had happened in the Mekong delta. The companies offered high prices for cane while the sugar price in the market was low. As a result, sugar mills lost out.

Businesses have to think of the worse situation to help them to break even. Sugar mills need to discuss prices with cane growers. In fact, at the first meeting they agreed that the price should be VND 570,000 per tonne. When the price of sugar on the market fell, they agreed to lower the price to VND520,000 per tonne.

This is considered the best way to do business, but with a spike in petrol, fertiliser and food prices, the two parties should once again sit down together to re-negotiate the price. That’s my suggestion.”

VOV: Usually, the contracts are unilaterally prepared by the sugar mills. Do you think it is really fair?

Mr Phai: That’s a fact and I don’t negate it. I think in this situation it is important to get intervention from outsiders, including a functional agency or a mediator. In this business the government does not intervene by setting a minimum price for the cane and let the mills and farmers decide themselves. Principally speaking, whatever contract, it must ensure 40 percent of the benefits for farmers to pay for their labour and the cost of fertiliser, seedlings and other expenses.

In the context of the recent price hike, sugar mills would adjust the price level they pay for farmers in a reasonable way.

VOV: In reality, whenever there is a price hike, the hardest hit people are farmers as in the case of rice or tra fish breeders who are forced to sell at dumping prices. Do you have any solution to prevent this?

Mr Phai: We have to look at the root cause of the problem – high productivity and the quality of the cane. First, we must admit that productivity remains low. In other countries, the average cane output is about 100 tonnes/ha, with the sugar content reaching 14-16 percent. In Vietnam, the output is only 50 tonnes/ha and the sugar content is only 10 percent.

Second, it is due to the poor processing capacity of sugar mills, despite using advanced technologies. The mills or farmers themselves cannot solve this problem, but need support from other sectors, including the government and the financial sector.

In addition to these two problems is the need to improve the infrastructure, including road and irrigation networks. Mechanisation is another factor that may help cut the costs during the harvest.

VOV: Do members of the association have any plan to buy cane from the next crop?

Mr Phai: In my opinion, before making any plans for the next crop, it is important for the sugar mills to consider thoroughly the Prime Minister’s Decision 80 on encouraging the consumption of agricultural products through contracts. This decision has been implemented in many localities, but not in the Mekong delta.

I agree that Decision 80 needs to be reviewed to enable the mills and farmers themselves to reach a compromise for their mutual benefit. So for the next crop, I call upon the mills and farmers to sign contracts – a legal tool that forces every party to honour their commitments.

On the other hand, the Association with its affiliates operating across the country should sit down together to review the situation and discuss their action plans, including effective measures to forecast a market growth trend in sugar and cane sales.

But whatever happens at the meeting, I think it must encompass the recommendation “one tonne of sugarcane should produce 60kg of sugar”. This formula is widely used in the sugarcane industry as it ensures benefits for both sugar mills and cane growers.