Sugar Cane Investment

[engrin]

A member of my TG's family wants to build a house and have it finished by new years so she is looking for some extra cash.

She has 20 rai of sugar cane that is around 2 months away from ready to cut.

We have been offered the opportunity to invest 150,000 thai baht and get the proceeds for the harvest in return.

I know that sugar cane yields can very and the price of sugar cane can change.

The land is in Kalasin province and other members of my TG's family say it is a good deal but obviously don't have the cash invest.

Just wondering if experienced members think this is a good investment on paper or something we should steer clear of? thanks

[slapout]

Price of sugar has been dropping, thus so is/will price of cane, 150,000 baht investment will require 8000_ baht net per rai to recover your investemt. Who will pay for harvest, delivery, etc? Are the buyers contacting to purchase field crop and they absorb all expense , thus pay for standing crop before they haul it away?

I am not into cane farming here in Thailand, but it looks to me like it will be a iffy investment (sounds more like a loan) return, IF the decision is made NOT to pay back your loan you have just lost your 150,000. I was going to mention that the 150,000 could be further secured by a signed agreement on the sugar cane for the 2015 harvest also, or repayment of debt in full, whichever comes first.

[engrin]

thanks for the response. the agreement would be for us to handle all expenses related to harvesting and take whatever profits that are made...

[tingtong]

i would be vary for the reasons slapout mentioned.

8000thb/rai to come out about even...whereas they have some talk about cane price might be as low as 800thb/ton this year ( was 1000thb in our region last yr)...

then you deduct your cost for cutting and transportation, probably around another 2-300thb/ton....

avarage sugarcane yields seem to be 10-12 ton maybe...do your math...you take the risk, for a very slim return in the best.

in my opinion it isnt worth the trouble.

that the family still touting it as a good investment to you, with the above finances i made....hm, especially questionable the intention.

Edited October 13, 2013 by tingtong

[loong]

I am in Khon Kaen province, so not so far from you.

A lot of the farmers around here have changed from cassava to sugar cane in the last year.

Anticipate a glut of sugarcane at the next harvest. There is a good chance that there will be a dramatic drop in price.

This is a deal that a person with no knowledge of the local market, likely yield etc should stay away from.

[IsaanAussie]

The loan is to build a house. Two cautions, one not much of a house for that money, second wrong time of year to start in Isaan.

[engrin]

My girlfriend said her father has a contract that guarantees 1,100 per tonne. Her father also said that they project 14 tonnes per rai.

[engrin]

update: The father has to bring in minimum 100 tonnes to get the above price.

[kaspercat]

I am in Khon Kaen province, so not so far from you.

A lot of the farmers around here have changed from cassava to sugar cane in the last year.

Anticipate a glut of sugarcane at the next harvest. There is a good chance that there will be a dramatic drop in price.

This is a deal that a person with no knowledge of the local market, likely yield etc should stay away from.

The final price of sugar cane is determine by the government after all export has been sold. It does not really depends on local sugar or cane glut. Almost every year, there's extra final cane price payment over what was paid in season. Keep this in mind.

[loong]

I am in Khon Kaen province, so not so far from you.

A lot of the farmers around here have changed from cassava to sugar cane in the last year.

Anticipate a glut of sugarcane at the next harvest. There is a good chance that there will be a dramatic drop in price.

This is a deal that a person with no knowledge of the local market, likely yield etc should stay away from.

The final price of sugar cane is determine by the government after all export has been sold. It does not really depends on local sugar or cane glut. Almost every year, there's extra final cane price payment over what was paid in season. Keep this in mind.

If this is true, do you really believe that this "extra payment" finds its way into the farmers' pockets:?

[woody087]

My wife has a quota of 2000 tonne of sugarcane per year.Last year price was 950 per tonne,this year she was told 900 baht per tonne will be good.To get 12 tonne per rai is very good,here to get 10 tonne per rai is good,average was closer to 7 or 8 tonne per rai

Sent from my GT-I9082 using Thaivisa Connect Thailand mobile app

[David48]

engrin, if you will allow me to add some extra advice above what you asked for in the OP.

We, Westerns, are oft referred to as Bank. Well, don that cap for a second and professionally review the offer being made to you.

You are being offered a 'deal' to a person who you probably only know from a distance.

The deal or the 'promise' seems to be fully priced. Now, remember you have been offered to 'invest' ... that means, in our Culture, ROI (return on equity), risk and interest.

Just so you know, a common interest struck at the hock shops which have their security covered at maybe 150% (meaning they lend say 75% of the gold they have been offered as security) and charge 2% interest a month.

Now, if you were a Bank being asked for 100% lend on an agricultural product that is still 2 months away from being harvested ... the bank would quickly show you the front door.

So, everyone keeps face, maybe say yes, sure, I love to help your relative. But you are not sure about the harvest and require some extra security ... some gold for example.

Given the 150,000 being asked, no less then 1/2 security so I'd be chasing 4 baht gold (about 80,000 Baht), which you would be given before any money changed hands and hold till the harvest went ahead and your moneys repaid.

If the reply comes back that the person doesn't have 4 Baht gold, then reply, maybe not, maybe the relative can borrow it (the gold) from others?

So, you've made the offer ... face is saved.

If they come back with the gem ... 'why you kee nock Farang, you have money, why you not share or lend ? Thai person poor, Farang rich' ... you will have an insight into how they see you ... as a Bank.

If you are a Bank, go back to the 2^nd sentence of this post.

Just trying to help ...

.

[loong]

......................................... other members of my TG's family say it is a good deal

Did they happen to mention whether they consider it a good deal for you or for the family member?

[zyphodb]

Easy answer for all of the reasons above & many more not mentioned.... DON'T lend them the money, I'd say 95% probability that you'd be lucky to see any of it back, let alone a 'profit'... 150,000Bht is equivalent like for like to getting a £100,000 unsecured loan back in the UK, you wouldn't get one in the UK so why should you give one here... no Thai would do this deal, they're just trying it on with the Farang....

And don't worry about 'losing face' you're a Farang so you haven't got any to lose in the first place...

[finnomick]

Engrin, there are many very valid points in the replies to your topic. I'm not going to write about the why's and wherefore's regarding the family or loans, just about sugarcane itself.

Firstly, we grow sugarcane -- that's not actually me, but my wife and most of her family. We are surrounded by the stuff. I think I know what I'm writing about but no doubt like any other topic on TV, there are those that will disagree with me. It's up to you to determine what's bullshit and what's not.

My first question to you is what is the 1,100 your gf's father has been guaranteed ? Is this the price per ton from the factory because if it is, it's wrong. I think you mean 11,000 baht per ton but if it is, it's way over optimistic. In April of this year, we got 9,500 baht per ton which is LESS than last year's price. As previously written, we also expect the price to be lower again this year. Two reasons for that. With all the rain, some of the crop has been standing in water for a couple of weeks and if the water doesn't go down soon, it'll start to rot and will not recover. Second reason is volume and the number of farmers switching to sugarcane. The factories cannot cope with the extra volume now. And remember, we had to take out all the harvesting, loading and transport costs from this figure.

A quick lesson on sugarcane growing. In the first year, you will incur the greatest costs and have the smallest yield. Greatest costs because you have to pay for the initial plants plus special equipment for planting. You may get up to 5 years / harvests from the original planting but then it will have to be replaced equals start again. Some people only get 3 years / crops. All we do is keep some of the crop back and use it for re-planting.

Don't believe all the factory representative will tell you. For the last two years ( and one of the reasons which proves the factories can't cope ) we have been told the factory will send cutting teams and trucks at harvest time. Should have been here in January. We ended up cutting and transporting by ourselves and that was in April of both this year and last year so we've lost 3 months growing time. When you reckon you only get one harvest per year, 3 months is a big chunk of growing time.

14 tons per rai is very optimistic. No doubt there will be someone who has got 14 tons, but I've never come across one yet. 10 tons per rai is a better figure to work on as an absolute maximum.

As I've mentioned in paragraph 3, the price is going down. Another poster has mentioned a residual payment. This is correct. We got it the first year, but not last year. Who knows what will happen when we harvest again next year. I wanted to rip the crop out in April of this year, but the misses wanted to leave it in for another year to somewhat spread the inital planting costs. As we don't rely on the money for anything, I agreed, but this crop will be the last. Some of the family who already have rubber trees have planted more rubber in place of the sugarcane where the land is higher. This is the way I want to go but as we all know, the price of rubber is very volatile at the moment with farmers very angry with the government over a falling price and the government now saying it is illegal to store rubber sheets for when the price rises.

If I've missed anything, just ask.....

[MobileContent]

Stay away from this deal.

Ask them to build the house after the harvest as they can sell some Rai's.

For me this seems to be almost a red line that has been crossed. Was in that same situation many years back. Mrs asked me to help her bother as he had no home to stay. Borrowed him 30,000 Baht due to my stupidity and when harvest came, they came up with all kinds of stories to delay the repayment. In the start they called me chai-dee as I helped them. When I wanted the money back they called me stingy.

David48 made a good post on this subject.

[ozzydom]

Engrin, there are many very valid points in the replies to your topic. I'm not going to write about the why's and wherefore's regarding the family or loans, just about sugarcane itself.

Firstly, we grow sugarcane -- that's not actually me, but my wife and most of her family. We are surrounded by the stuff. I think I know what I'm writing about but no doubt like any other topic on TV, there are those that will disagree with me. It's up to you to determine what's bullshit and what's not.

My first question to you is what is the 1,100 your gf's father has been guaranteed ? Is this the price per ton from the factory because if it is, it's wrong. I think you mean 11,000 baht per ton but if it is, it's way over optimistic. In April of this year, we got 9,500 baht per ton which is LESS than last year's price. As previously written, we also expect the price to be lower again this year. Two reasons for that. With all the rain, some of the crop has been standing in water for a couple of weeks and if the water doesn't go down soon, it'll start to rot and will not recover. Second reason is volume and the number of farmers switching to sugarcane. The factories cannot cope with the extra volume now. And remember, we had to take out all the harvesting, loading and transport costs from this figure.

A quick lesson on sugarcane growing. In the first year, you will incur the greatest costs and have the smallest yield. Greatest costs because you have to pay for the initial plants plus special equipment for planting. You may get up to 5 years / harvests from the original planting but then it will have to be replaced equals start again. Some people only get 3 years / crops. All we do is keep some of the crop back and use it for re-planting.

Don't believe all the factory representative will tell you. For the last two years ( and one of the reasons which proves the factories can't cope ) we have been told the factory will send cutting teams and trucks at harvest time. Should have been here in January. We ended up cutting and transporting by ourselves and that was in April of both this year and last year so we've lost 3 months growing time. When you reckon you only get one harvest per year, 3 months is a big chunk of growing time.

14 tons per rai is very optimistic. No doubt there will be someone who has got 14 tons, but I've never come across one yet. 10 tons per rai is a better figure to work on as an absolute maximum.

As I've mentioned in paragraph 3, the price is going down. Another poster has mentioned a residual payment. This is correct. We got it the first year, but not last year. Who knows what will happen when we harvest again next year. I wanted to rip the crop out in April of this year, but the misses wanted to leave it in for another year to somewhat spread the inital planting costs. As we don't rely on the money for anything, I agreed, but this crop will be the last. Some of the family who already have rubber trees have planted more rubber in place of the sugarcane where the land is higher. This is the way I want to go but as we all know, the price of rubber is very volatile at the moment with farmers very angry with the government over a falling price and the government now saying it is illegal to store rubber sheets for when the price rises.

If I've missed anything, just ask.....

I think you added an extra zero mick,9500 baht a tonne is about 2 mill if you are cropping 10 tonne a rai from 20 rai.

[realenglish1]

IN a nutshell Its a bad Deal Stay away from it To many variables

[vincentc]

Hi,

We have our own plantation in Korat province, growing cane on our own land, have our trucks and team of seasonal workers.

just to give you ball park figures, we make about 8000 net per rai of land, sugar selling between 1000 and 1200 per tonne (for burned sugar, fresh gets better rates and priority Qs) depending on the sucrose content (not that i believe the factories measurements for a second, its more like a lottery). Distance to the mill is a key factor, we are about 40 kilometres away.

we often get deals proposed as yourself, farmers in need of money sell you one year of harvest beforehand; you pay for example in may for their planted land and harvest in, say december and get all profit if any. taking care of the land is yours as of the transaction date (fertiliser, pesticides, weeding..) we would never pay more than 4000, perhaps 5000 if it is offered late in the season. you save on the land prepping and planting, but maintenance and all other costs are still yours. if i understand the OP correct, he is paying 7500 per rai, which sounds a lot to me.

Could be worthwhile if you are offered this today, your cane is about 2.5 meters high by now and the factory really close. 20 rai is still harvestable by a family team, an untrained cutter can do about a rai a day, pro's do more. also make sure that you got a quota somewhere or you are not able to sell it. you will need to team up with some quota group to be able to sell to the mill and need to trust the group to pay you out.

i don't find sugar cane business sweet after being in it for 4 years. it sounded great on paper (that's why i gave it a try), but This is Thailand, so do not underestimate factors such as:

availability of workforce (drunk, drug abuse, taking money upfront and not showing up..)

Envy or pyromaniacs setting land of successful plantations on fire

Sabotage of trucks and machinery

Theft of irrigation equipment

Land border disputes

Diseases and pests due to mono cultures in the region

etc, etc.

i would not do it again. the whole thing is profitable, but at a high (social) expense. The increase in land price makes it worthwhile, not the actual planting/harvesting for me.

I'd give the guy 5000 per rai if the cane looks healthy. you might make about 3000-4000 net per rai on the deal, but it all depends...

[metisdead]

A post in all caps has been removed. Turn off your Caps Lock button when posting.

[thousandpercent]

Price of sugar has been dropping, thus so is/will price of cane, 150,000 baht investment will require 8000_ baht net per rai to recover your investemt. Who will pay for harvest, delivery, etc? Are the buyers contacting to purchase field crop and they absorb all expense , thus pay for standing crop before they haul it away?

I am not into cane farming here in Thailand, but it looks to me like it will be a iffy investment (sounds more like a loan) return, IF the decision is made NOT to pay back your loan you have just lost your 150,000. I was going to mention that the 150,000 could be further secured by a signed agreement on the sugar cane for the 2015 harvest also, or repayment of debt in full, whichever comes first.

Unless you are willing to spend years in court and tens of thousands on legal fees, and unless the defendant has assets you can seize, a signed agreement is useless. If you would not enter into the agreement without a contract, don't enter into it with one.

[thousandpercent]

The only way this can work is if you get the chanote to the land as security, but that's not simple or quick. It's not really that important that the house is finished by New Year. That's an arbitrary date that has no importance in a business deal. I would just say, "You'll proceed as planned and finish the house in March." A person is not asking for capital in order to make money, they are asking for capital because their business does not provide enough income to finance their dreams. You are not an investor, your purpose is to grant material wishes. You are a genie. Genies never make a profit.

[engrin]

Update and a few more details

First, my TG's mother is the one who wants to buy the harvest as an investment.

She/my TG/relatives and other locals are certain it is a good deal at 150,000 but of course, none have the cash on hand.

The mother would take care of the sugar cane along with her sons.

I am posting here to get an idea from those who know sugarcane whether her mother will be able to pay me back from the profits.

If I was to give her mother the money, she would have to pay me back and the profits would be hers.

There have been offers flying around from potential buyers for the harvest as high as 200,000 baht but they want to pay in installments.

[Ulic]

Like lending money to family. As long as you see it as a gift and expect nothing back, no problem. If you think it

is an investment and need the money returned, big problem. Up to you on which side you fall.

[khunPer]

I think you should stay away from that investment, if you are not a farmer, familiar with sugar cane and how that business work in Thailand.

The sugar cane can be harvested for three years. Often the farmer is financially supported by a/the sugar cane company, which can be loans against the harvest income and deducted from the outcome, some kind of guarantie (for example the farmers tractor) may be given for the loan. Also prices may go up and down. I've seen farmers with a negative account after the first year, so onlky after two or three years, they make money. I've also seen farmers getting into this “fantastic” sugar cane business, giving up halfway and never doing it again.

You may need to know more details about the local business, before you decide to invest.

An often used practice for financial support to the farmers is, to take up a loan based on the coming harvest. For example rice farmers, who need money for furtilizers etc. (or just need cash money for whatever reason) may take a loan. The interest/profit is a split of the harvested rice, which may be 2/9th for the loan. The initial money must also be paid back, but often the loan will continue (almost for ever) and the 2/9th rice paid every year. I don't know about sugar cane harvest splits, as the farmers nomally use the sugar cane company or a bank (the sugar cane company may gurantie for the bank). The gurantie for a loan will be the Land Deed. In many villages the Land Deeds are not (yet) Chanote, and if not, the land may only be transfered to family members or relatives (so depending you you Thai GF's relation).

Always make any loan paperwork (contracts) together with The Head of Village (who will be witness) and keep the original Land deed together with the signed contract, copy of ID-card (both husband and wife, if married), copy of House Book and an original signed, but blank proxy for transfer of the land..

[David48]

Update and a few more details

First, my TG's mother is the one who wants to buy the harvest as an investment.

She/my TG/relatives and other locals are certain it is a good deal at 150,000 but of course, none have the cash on hand.

The mother would take care of the sugar cane along with her sons.

I am posting here to get an idea from those who know sugarcane whether her mother will be able to pay me back from the profits.

If I was to give her mother the money, she would have to pay me back and the profits would be hers.

There have been offers flying around from potential buyers for the harvest as high as 200,000 baht but they want to pay in installments.

Mate, you joined the Forum 9 years ago, so, I presume that you've been kicking the dirt around here long enough to know better.

You've had a great amount of Cultural, Cane and Business advice ... all telling you to smile but walk.

We only post a reply because we care.

No-One ... repeat NO-ONE has said yes, do the deal.

Up to you from now on.

God bless you and all your investments.

OH ... stay safe on that Honda ... I'm also a Biker.

[engrin]

9 years? It's been THAT LONG? hahah

Just wanted to ask those in the know what they thought about it.

I will be walking away from this one.

[David48]

9 years? It's been THAT LONG? hahah

Just wanted to ask those in the know what they thought about it.

I will be walking away from this one.

+1

(have ran out of likes)

Well done ... enjoy the ride ...

[engrin]

thanks to all for the advice especially those who have sugar cane knowledge/experience !

[finnomick]

Engrin, there are many very valid points in the replies to your topic. I'm not going to write about the why's and wherefore's regarding the family or loans, just about sugarcane itself.

Firstly, we grow sugarcane -- that's not actually me, but my wife and most of her family. We are surrounded by the stuff. I think I know what I'm writing about but no doubt like any other topic on TV, there are those that will disagree with me. It's up to you to determine what's bullshit and what's not.

My first question to you is what is the 1,100 your gf's father has been guaranteed ? Is this the price per ton from the factory because if it is, it's wrong. I think you mean 11,000 baht per ton but if it is, it's way over optimistic. In April of this year, we got 9,500 baht per ton which is LESS than last year's price. As previously written, we also expect the price to be lower again this year. Two reasons for that. With all the rain, some of the crop has been standing in water for a couple of weeks and if the water doesn't go down soon, it'll start to rot and will not recover. Second reason is volume and the number of farmers switching to sugarcane. The factories cannot cope with the extra volume now. And remember, we had to take out all the harvesting, loading and transport costs from this figure.

A quick lesson on sugarcane growing. In the first year, you will incur the greatest costs and have the smallest yield. Greatest costs because you have to pay for the initial plants plus special equipment for planting. You may get up to 5 years / harvests from the original planting but then it will have to be replaced equals start again. Some people only get 3 years / crops. All we do is keep some of the crop back and use it for re-planting.

Don't believe all the factory representative will tell you. For the last two years ( and one of the reasons which proves the factories can't cope ) we have been told the factory will send cutting teams and trucks at harvest time. Should have been here in January. We ended up cutting and transporting by ourselves and that was in April of both this year and last year so we've lost 3 months growing time. When you reckon you only get one harvest per year, 3 months is a big chunk of growing time.

14 tons per rai is very optimistic. No doubt there will be someone who has got 14 tons, but I've never come across one yet. 10 tons per rai is a better figure to work on as an absolute maximum.

As I've mentioned in paragraph 3, the price is going down. Another poster has mentioned a residual payment. This is correct. We got it the first year, but not last year. Who knows what will happen when we harvest again next year. I wanted to rip the crop out in April of this year, but the misses wanted to leave it in for another year to somewhat spread the inital planting costs. As we don't rely on the money for anything, I agreed, but this crop will be the last. Some of the family who already have rubber trees have planted more rubber in place of the sugarcane where the land is higher. This is the way I want to go but as we all know, the price of rubber is very volatile at the moment with farmers very angry with the government over a falling price and the government now saying it is illegal to store rubber sheets for when the price rises.

If I've missed anything, just ask.....

I think you added an extra zero mick,9500 baht a tonne is about 2 mill if you are cropping 10 tonne a rai from 20 rai.

Yes Ozzydom, you are correct -- got a bit carried away no doubt from all that bullshit in the mushroom farm. My apologies to one and all.