Sugarcane is one of Thailand’s most important agricultural crops and critical to its economy. The sugarcane supply chain - consisting of the growers, millers and associated logistics personnel - provides jobs for more than 1.5 million people and generates almost USD $6 billion per year. The country is the second biggest exporter of sugar in the world, and is highly competitive, both domestically and in the world market, and it mainly exports to ASEAN countries. However, while its sugarcane industry brings many economic benefits to Thailand, there are a number of sustainability issues surrounding sugarcane cultivation and milling. Using Bonsucro as platform for collaboration, along with its Standards, a number of key actors are working towards an improved industry.
Sustainability Challenges
Video: Sustainability in Thailand
The Thai sugarcane industry is one of the cornerstones of its economy. Like any other sugarcane industry around the world, Thailand has a number of sustainability issues, particularly when it comes to smallholder farming, water, agricultural practices, and cane quality. There is a growing need to monitor and improve environmental sustainability, social impact, and economic performance.
1. Smallholders
The majority of sugarcane farmers in Thailand are smallholders (83% produce between 1-2000MT), and are contracted by mills to supply cane. Only a few sugarcane mills operate and own their own plantations, with the majority sourcing from contracted sugarcane growers. The mills supply some measure of support to farmers, for example with financing, providing inputs (cane varieties and fertilisers) and extension services. The sheer amount of farmers involved in cane farming presents a considerable challenge when it comes to improving their cane production:
- Monitoring: It can be resource intensive and costly to monitor practices at such a large scale, and training and improvement programmes need to be sufficiently scalable to be effective.
- Record-keeping: Many smallholders are not accustomed to keeping detailed farm records, meaning there can be a lack of baseline data to measure progress and understand areas for improvement.
- Land & water titles: About 70 to 80% of the land is rented by farmers from an agent or someone they trust – usually through a verbal contract and often through a long-term arrangement. This makes it difficult for many smallholders to provide evidence of compliance with land and water titles.
2. Water / Climate Change
Water shortage and drought is a major issue for sugarcane cultivation in Thailand -and is seen as the main reason for low sugarcane yields. In Thailand, most cane-growing areas are rain-fed (only 10% are planted in irrigated zones), especially in the North-eastern and Central regions where the major cane growing areas are found. It is projected that severe drought will continue to decrease yields over the next 2 years – the Sugarcane Planters Association forecasts that Thailand’s sugarcane output may decrease by 10% per year due to climate change issues.
Smallholder famers have a high exposure to the effects of climate change. A season of water shortage, for example, can push farmers into debt as they increase their inputs, such as fertiliser, to compensate for the low yields.
3. Poor agricultural practices
The use only a few sugarcane varieties means that the risk of severe diseases affecting much of the country's sugarcane is high. When infections do occur, they can have a big impact on cultivation.
Cane burning is widespread, accounting for more than 60% of cane production. The main reasons for cane burning are labour shortages and manual harvesting practices (mechanised harvesting is less than 10%). Cane burning could be a contributing factor to poor yields as it is known to lower biodiversity in the soil, leading to soil erosion and exhaustion over time. However, it is still widely used (in 65% of production) due to labour shortages as more than 90% rely on manual harvesting).
Farmers are contractors and most farmers and do not have the investment capability towards increased mechanisation, installing irrigation or other technologies aimed at improving the quality and quantity of cane production.
Opportunities in farming
Low production costs: Thailand’s sugarcane production costs (excluding transportation) is about 1,049 THB/MT (or around 13.6 cents/lb), which is second only to Brazil’s at 11.2 cents/lb .
Competitive production season: Thailand’s annual sugar production season (November to April) is different from Brazil’s (April to October), which decreases competition in the export market.
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Sugarcane Milling
Sugarcane mills in Thailand employ an estimated 50,000 workers in 27 different provinces. The majority (nearly 75%) are in the Central and North-eastern regions. Major milling groups of Thailand are well represented in Bonsucro's membership: Mitr Phol, Thai Roong Ruang, Khon Kaen, Eastern Sugar and Cane, Khon Khaen Sugar Industry (KSL), and KI Sugar Group are all Bonsucro members.
The Mitr Phol and Thai Roong Ruang Groups are the largest of the milling groups, accounting for 20% and 14% of total production capacity of sugar in the country, respectively. Both are also major exporters of sugar and ranked 3rd and 4th of all sugar exporters in the world market.
Sugarcane supply
Mills have identified the supply of cane as their biggest challenge. To address this, farmers need to be incentivised and trained. However, changes in farming practices may require investment – and support is needed for this. Farmers are contractors and mostly smallholders and do not have the investment capability toward mechanisation, irrigation or broader technology. Most mills are aware of the challenges and look forward to engaging with their farmers. Environmental challenges are becoming stronger with climate change effects as well as social impacts to sugarcane farmers and communities.
Opportunities in Thai Sugarcane Milling:
Good policy support and measures: Regulation of the sugar industry by the Thai government allows sugarcane mills to maintain their profitability even during the times of depressed sugar prices in the world market. The support measures include:
- Restrictions of sugar mill and trader licenses
- Control over sugar output by the quota allocations for domestic consumption and for exports
- Establishment of a benefit sharing system between sugarcane planters and sugarcane mills (70:30), which helps stabilise factory costs.
Valorisation of by-products: Sugarcane mills also earn additional income from investment in related businesses - most of which use by-products and excess materials from the sugar industry as inputs such as ethanol, biomass electricity generation, paper pulp, fertiliser, particle board, etc.
Mitr Phol Sugar Group
Mitr Phol, the country's largest milling group, was the first in Thailand to achieve Bonsucro certification to the Production Standard in 2016, with their Phukhieo mill located in the north of the country. Since then, the mill group has added another, Dan Chang, in Suphanburi province.
“The Bonsucro certification at Mitr Phol Park in Phu Kiew district, Chaiyaphum province, is truly a testament to our over 60 years of dedication to quality and great care in all aspects of agricultural industry, from farming and production procedures, environmental management, legal and regulatory compliance, as well as respect for human rights and labour standards." - Krisda Monthienvichienchai, President and Chief Executive Officer, Mitr Phol Group
Mr Monthienvichienchai explains Mitr Phol's reasons behind its decision to pursue Bonsucro certification: "The practice is conducted based on Mitr Phol’s policy for creating a sustainable agricultural value chain, from sugarcane farming, sugar production, until product delivery to end consumer. The certification is another achievement index for our overall operational capability, a major progress from the recognition of Bonsucro Sustainability Award we received in 2015."
Modern Farm Programme
Using Bonsucro's Production Standard as the framework, Mitr Phol have set up its Modern Farm Programme, aimed at getting smallholder farmers that supply its mills to the levels required for certification. Taking Bonsucro’s indicators as the basis for sustainability improvements, extension workers work with these farmers for performance improvement.
The Programme started with a small number of farmers who are considered as leaders, with the aim of demonstrating the benefits of sustainably farming practices to others and helping to expand participation in the programme.
Thai Roong Ruang Sugar Group
Thai Roong Ruang (TRR), founded in 1946, is another major milling group in Thailand with 9 mills in their portfolio and an annual crush capacity of 15.19 million tons. All of their mills have refineries attached. 45% of their exports go to Indonesia, followed by Japan and Taiwan, and they count some of the world's biggest brands as their customers.
Their Saraburi mill, which is currently working towards Bonsucro certification, is supplied by over 2,500 farmers, bringing the sugarcane from a 50 kilometre radius around the mill. Like other mills that are working with smallholders, they have instituted their own smallholder outreach scheme, called the Smart Farmer Programme, that uses Bonsucro's Production Standard as its foundation and aims to guide . They too believe that it is best to start with a small group of farmers before increasing the scale of the programme. Their smallholder programme currently works with 50 farmers. The Smart Farmer Programme is also being implemented at another TRR mill, Lopburi, in the neighbouring province to Saraburi.
Piloting the new Bonsucro Production Standard for Smallholder Farmers
In March 2018 TRR Saraburi also piloted the new Bonsucro Production Standard for Smallholder Farmers, To begin with, they have been working with 30 farmers, with the usual farm size ranging between 15 and 20 hectares. Techanit Onaree is leading the mill’s work with smallholders: “In total we’re working on Bonsucro implementation with farms totalling around 480 hectares, but we’re aiming at nearly tripling that amount next year”.
For Techanit, the new Standard will be a big boost to their sustainability work: “It helps to make it clearer for smaller farmers as to what is required of them. Before it was harder to get the farmers to commit themselves to working on Bonsucro, but we’re seeing that change with the new Standard, which is much more aligned with the realities on the ground.”
This approach is summed up by TRR Sugar Group's Nicha Asadatorn, who has been the driving force behind the group's sugarcane sustainability work. She believes that working toward sustainability will help to achieve a long-lasting partnership with farmers for mutual success. “Farmers are the key for sugarcane mills, and we work with them to improve their sugarcane productivity and also to promote sustainability. The new Bonsucro Smallholder Standard is working well with our farmers and they are very happy with the results so far, and this has been reflected in good quality sugarcane”.
A Platform for Collaboration
Bonsucro, with its multi-stakeholder set-up, is uniquely placed for fostering collaboration between its members, who are drawn from all areas of the sugarcane supply chain, including mills, farmers, major global brands, and civil society organisations.
One such example is a project in Thailand between the major buyers of sugar, PepsiCo and Nestlé, and Mitr Phol Sugar Group - all Bonsucro members.
The programme aims to reach over 300,000 smallholder farmers through the creation of a continuous improvement model that will provide them with the support and knowledge for implementing more responsible agricultural practices.
FairAgora Asia, as the implementing partner, is working directly with the farmers to build capacity and develop mobile-based technology for impact measurement. Based on the core indicators in the Bonsucro Production Standard, this is an example of Bonsucro members working together to meet their own sustainability goals.
A burgeoning bioeconomy
Sugarcane is a remarkable plant, with many uses that go way beyond that of just sugar, and recent developments in Thailand as demonstrating just how versatile the plant is and how it can be a cornerstone of a modern bioeconomy.
In 2017 the Thai government launched an ambitious plan to become a leading bioeconomy hub for the region using private and public investment potentially reaching upwards of $11 billion.
Sugarcane is identified as one of the main feedstocks for Thailand's biorefineries, producing biofuels and biochemicals as well as biopharmaceuticals.
Corbion: Cane sugar to plastics
Bonsucro member Corbion, headquartered in the Netherlands, produces lactic acid and lactic acid derivatives, and is also a leading company in functional blends containing enzymes, emulsifiers, minerals, and vitamins. As part of its 50/50 joint venture with Total, it has constructed a lactic acid polymerisation plant in Rayong, Thailand.
The plant uses Bonsucro certified cane sugar as a feedstock. Through a fermentation process, the sugar is used to produce lactic acid, which in turn is used as a base for bio-based innovations, such as PLA bioplastic pellets. PLA pellets can then be used for a broad range of applications, such as packaging, consumer goods and automotive components.
“Becoming Bonsucro Chain of Custody certified shows that Corbion is committed to the responsible sourcing of the sugar that goes into its bioplastics production. An innovative company basing their plant in Thailand is testament to the drive that the Thai sugarcane industry is showing to become a leader in sustainability, positioning itself as a cornerstone of the country’s efforts to become a leading bio-based economy.” - Rick Lyu, Bonsucro Regional Director for Asia
The first batch of Bonsucro certified sugar for production of Corbion PLA (Poly Lactic Acid) was delivered in August 2017 to the Total Corbion site in Rayong, Thailand. The delivery was from one of Mitr Phol's two Bonsucro certified mills. For the first time, PLA biopolymer resins made from Bonsucro certified sugarcane are commercially available.
Total Corbion’s Senior Marketing Director, François de Bie, highlighted the benefits that sugarcane-derived bioplastics can bring: “A reduced carbon footprint and the multiple end-of-life solutions that PLA offers are key reasons why many brand owners convert from traditional plastics to PLA bioplastics.” Such credentials suggest some of the reasons behind the continuous growth of the bioplastics market. “With the Bonsucro certification, we now offer our customers the guarantee that the biomass used to produce PLA was grown supporting the principles of sustainable agriculture”.
Supporting the implementation of sustainable production and processing at its suppliers is a key focus for Corbion as it takes its next steps. “As a Bonsucro member, Corbion is already working directly with its own network of industry suppliers – from Thailand to Brazil – to implement Bonsucro’s Standards”, explains Kun Chalermkiatkul, Global Sugar Director at Corbion. “What this means in practice is that we are identifying with our suppliers the areas where improvement is needed to enable them to meet the Standards – giving them an opportunity to make the changes necessary to achieve the levels of Production Standard, which includes answering questions and lending our expertise wherever we can. As certified Bonsucro sugar becomes more readily available, Corbion commits to sourcing Bonsucro certified sugar for a part of its overall global sugar needs.”
Bonsucro Thailand Accelerator Plan
In October 2017, Bonsucro convened a Thai Mill Summit in Bangkok. During this Summit, the industry identified challenges, opportunities, and next steps to develop a national accelerator plan. The industry demonstrated significant interest in addressing key sustainability issues and a commitment to improve performance.
The top four industry challenges identified by the Summit participants included:
- Define and explain of the business benefits that farmers will receive through Bonsucro certification
- Efficient training of farmers at scale, specifically to identify a model or system
- Challenges of land title, water permits, labour shortages
- Provision of consistent, efficient technical support to farmers, leading to reduced cane burning as well as optimised inputs such as fertilisers, agrochemicals, and water
Following the Summit, a Bonsucro Thai Accelerator Plan has been developed, which begins in 2018 and will run until 2021. The plan, coordinated by Bonsucro, will engage leading brands, millers, refiners, investors and other key actors to align the industry and drive verifiable continuous improvement.
The Thailand Accelerator plan will enable two parallel, reinforcing processes:
- Large scale systemic change in the sector through the collaborative platform approach that will deliver significant impact.
- Development and implementation of impact projects, as appropriate, to demonstrate scalable projects that target specific issues.
There are clear indications that farmers are interested in programmes that lead to productivity increase, decrease costs, and create more efficient sugarcane farming. Approaching this agenda through a sustainability framework, while verifying performance level improvement can tie the farmer agenda into the industry agenda of remaining a competitive, responsible global industry.
Many milling companies in Thailand are interested in driving improvement through a sustainability lens, and they are eager to provide sustainability performance to international customers in Thailand and in the international market. This translates into active participation of various large mill groups in Bonsucro, as well as a drive towards certification. Various Bonsucro members, including civil society organisations and service companies, have useful tools and programmes that can be integrated and scaled up through a Bonsucro backbone programme.
Want to get involved with the Accelerator Plan?
Read the white paper: 'Thai Sugarcane Sector & Sustainability'
In August 2017, a white paper was published providing a high-level overview of the Thai sugarcane industry and identifies key opportunities for driving the sustainability agenda forward using the Bonsucro standard as a reference framework. The report is based on data collected from a desktop review of market intelligence, technical data, and government policy, as well as from insight acquired through stakeholder engagement. An additional workshop session was included as part of Bonsucro’s Technical training week in Thailand.
Co-ordinated by Bonsucro, and written by FairAgora, this study was initiated and funded by PepsiCo with support from Corbion.
