- Thai cane farmers will enjoy record earnings next season.
- However, it could cost them more than ever to produce cane (11,000 THB/rai).
- Cassava should also slightly pay more than cane, which may impact our production estimate.
Record Thai Cane Returns in 2021/22
- We previously thought Thai farmers would receive 1,000 THB/mt for their cane next season.
- However, having spoken to millers and farmers in Thailand, we now think will be it be at least 1,050 THB/mt, a new record.
- We say “at least” as some have already been offered 1,300 THB/mt for delivering a higher proportion of fresh cane, which has not been burnt.
There’s a Problem Though…
- It could cost Thai cane farmers a record 11,000 THB/rai to produce cane next season.
- For newly planted cane this would equate to about 800 THB/mt of cane:
- Farmers can usually harvest around 13-15mt of newly planted cane per rai.
- The drought of 2019/20 and 2020/21 means Thai farmers had to plant more new cane than usual this season.
- New planted cane should return more sugar and be more resilient to any dry weather.
- But there is a trade-off:
- Planting new cane costs more than using cane that has been cut and regrown (ratooned).
- Farmers also like to apply more fertilisers to new cane to help boost agricultural yields.
- However, high freight costs, and strong demand from other key producers (US, China, India) has driven up the cost of importing fertilizers.
- Despite this, we still think Thailand will produce 93.7m tonnes of cane.
- 42.2m tonnes (45%) of this should be newly planted, as opposed to ratooned (cut and regrown), cane.
Cassava Therefore Pays Slightly More Than Cane
- The farmers therefore have a tricky decision to make as the returns for cane and cassava are very similar.
- Farmers often get paid more for newly planted cane as the sucrose and agricultural yields tend to be higher.
- However, cassava returns should hold strong on the back of strong Chinese demand.
- We think cassava farmers could make 4,410 THB/rai next season, whilst cane farmers could make 4,047 THB/rai all in.
- These figures represent the farmers’ total earnings after Government subsidies for fresh cane deliveries, strong sucrose yields (etc.) are considered.
- On the one hand, cassava is a better option as it performs better in the face of drought.
- It’s also an easier crop to manage as cane demands more land preparation, fertilizer, and pesticide.
- However, the perk of planting cane is that can be ratooned (cut and regrown) at least 2-3 times, when it’s farmed correctly, and the weather behaves.
- This reduces costs for year 2 onwards and may make cane a more profitable crop in the longer term.
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