Besides exposing Thailand’s $1.3 billion a year in sugar subsidies, Antoine Meriot also made another valuable observation in his recent study. It compared the efficiencies of sugar makers, noting, “Thai sugar producers are relatively inefficient compared with other major producers, such as leading exporter Brazil.”
Specifically, Meriot used sugar recovery rates – a measurement of how much sugar can be removed from a stalk of cane or a sugar beet – to demonstrate industry efficiency.
The higher the recovery-rate percentage, the more sugar that is extracted. As an industry’s seed technologies, farm equipment, factory efficiencies, and business know-how improve, less of the plant is wasted. Meriot observed:
In terms of industrial performance, the recovery rate for the Thai sugar industry is around 10.5%, meaning that 9.5-10 mt of cane are necessary to produce 1 mt of sugar. This is relatively low in comparison with Brazil or Australia where rates are close to 12%, or with sugar beet in Europe at 14-15%, due to higher sugar contents. U.S. recovery rates are about 13% for cane sugar and 15% for beet sugar.
Another observation we can make…is that the recovery rate [in Thailand] did not improve over time, but instead declined. There is definitely an issue with cane quality and process.
Put another way, Thailand is only able to turn about 10% of a sugarcane stalk into sugar – the other 90% is waste – and its efficiency is worsening. The United States, by comparison, utilizes 13% to 15% of its raw materials, and other studies have shown that U.S. producers have greatly improved efficiencies over the years through research, new technologies, and vertical integration.
Why then has a relatively inefficient producer like Thailand, which has not taken steps to improve its methods, been able to expand production and make gains at the expense of more efficient competitors? The answer, according to Meriot, is subsidization.
The global sugar market deserves better. Subsidies around the world should be rolled back through the Zero-for-Zero campaign so the most efficient businesses prosper, instead of the most subsidized.