RP won’t import sugar next year

The Philippines may not buy sugar in 2007, after importing about 50,000 metric tons this year, as rising prices of the sweetener have encouraged farmers to plant more, Sugar Regulatory Administration (SRA) head James Ledesma said.

The Philippines may have a surplus of 200,000 metric tons next year as sugar production is forecast to rise 8.3 percent to 2.2 million metric tons, he said.

"We won’t be importing sugar next year because we expect better harvests,’’ Ledesma said. "We would be exporting but the numbers are still too raw to say exactly how much.’’

White sugar rose to a two week high in London yesterday, after storms destroyed crops in Australia, the world’s third- biggest exporter. White sugar futures have more than doubled to $446.2 a ton since May 2003.

"We’re expecting bumper harvest next year because higher sugar prices in the world market are attracting more farmers to shift back to planting sugar,’’ Francisco Varua, president of the Philippine Sugar Millers Association, said.

Sugar production may fall to 2.018 million tons this crop year ending August from 2.34 million tons in 2004, when lower sugar prices prompted farmers to shift to corn, pineapple and bananas, Varua said.

Despite the forecast for a lower output, the country may have a surplus of 170,000 tons as consumption remains little changed at 1.9 million tons. Still, the country may buy 50,000 tons as traders boost exports to benefit from higher US quotas after hurricanes Katrina and Rita destroyed crops there.

The US is expected to lower the quota for the Philippines in 2007 to its regular level of 137,000 tons from 216,438 tons this year. The Philippines could then export its excess sugar to Japan, China, South Korea and Indonesia, he said.

The Philippines sells to the US under a system that gives some developing countries above-market prices for a set quota of sugar.

In a related development, Ledesma said the local sugar milling sector is likely to experience further consolidation in the wake of tougher environmental laws and volatile sugar prices in the world market.

"We can expect more consolidation in the sugar milling business to take place. The uncompetitive ones will fall by the wayside, especially those which do not have enough resources to comply with the new environmental laws," said Ledesma.

The new environmental laws require huge investments by sugar millers. An average mill will require a minimum investment of about P1 billion to replace smokestacks and boilers that are considered more environment-friendly and meets the new acceptable air particulates emissions and water effluents.

"Since the sugar milling sector has gone through major consolidations in the last 20 years, there are signs that more will follow,"said Ledesma.

The sugar milling industry contracted over the years as a result of sharp fluctations in global prices of sugar.

From 43 sugar mills in 1984, there are now just 29 sugar mills. Pedro Roxas, executive chairman of sugar miller CADP Group Corp. (CAC.PH) and chairman of PSMA said that the retooling required to meet minimum anti-pollution standards will prompt the smaller players in the industry to just close shop.

"It (consolidation) is inevitable. The investments required will be bigger and to justify the higher costs of investments requires economies of scale. Some will have no choice but to close down," said Roxas. – With Bloomberg