In the doldrums

The Philippines is basically a subsistence sugar producer.

It produces just enough to meet the country’s local needs but most of the time, it has to import sugar to bring down high retail prices, flush out hoarded sugar, and add to allegedly dwindling local stocks. 

It exports sugar to the United States, the last one during the crop year 2020-2021, under a quota system that normally pays a higher price than what sugar producers would receive if they sold the sugar in the Philippines.

The US has set the Philippines’ sugar allocation at 145, 235 metric tons raw value for the current crop year covering the period Oct. 1, 2023 to Sept. 20, 2024, the same volume allocated as last year. The Philippines has not used its US allocation for the past three years because raw sugar production has not been enough to meet local requirements.

For CY 2023-2024, the SRA classified the entire sugar production as “B” sugar or for domestic use amidst a projected 10 to 15 percent decline in production due to the expected adverse effects of the El Nino phenomenon.

According to SRA administrator Pablo Luis Azcona, production is expected to fall short of the initial target of 1.85 million metric tons and raw sugar production is seen hitting a 24-year low.

The SRA has written the US Department of Agriculture at the start of the milling season last September for another moratorium on the country’s in-quota allocation in order to maintain the US as an export market for raw sugar. But there are local producers, millers and traders who have volunteered 30,000 to 60,000 metric tons of raw sugar to the US market and if the USDA gives the signal to export, then the SRA will have to classify part of the “B” sugar into “A” or sugar for export to the US.

The Philippines is not a net sugar exporter. It will probably export sugar to the US this year but it may also need to import because of the expected low production this crop year.

Even the USDA Foreign Agricultural Service (FAS) back in September has adjusted marketing year 2024 raw sugar production estimate down to 1.8 million tons due to declining sugarcane planting areas and weather disturbances including the ongoing El Nino that is expected to affect sugar production.

The USFDA forecasts refined sugar imports of 240,000 metric tons to stabilize consumer prices and provide two months of buffer stock. It said that consumption stays at 2.2 million metric tons as prices remain elevated.

Clearly, the 1.8 million metric ton expected production will not be sufficient to meet the 2.2 million metric ton local demand. 

During the crop year 2022-2023, the supply of raw sugar in the Philippines amounted to about 1.94 million metric tons while refined sugar and molasses reached 1.4 million tons and one million tons respectively, according to statista.com.

Ever since the SRA was established back in 1986 after the dismantling of the government-led sugar monopoly through agencies like the National Sugar Trading Corp. or NASUTRA which became the private corporation Philippine Sugar Marketing Corp. (Philsuma) and the policy-making body Philsucom or the Philippine Sugar Commission, it has all been a case of managing our meager sugar production to meet local demand and the US quota and then importing sugar when the need arises.

Just like any agricultural commodity in the country, farmgate prices are low during harvest season when there is so much produce and then prices drop until the next harvest. Small farmers are at the mercy of traders and take whatever price is offered to them absent any bargaining power. 

With the expected drop in production, we can anticipate another year of high refined sugar prices, something that household consumers of sugar as well as small and big commercial users like bakeries and small eateries on one side and soft drinks manufacturers on the other are starting to dread. 

Year in year out, it has been a long vicious cycle of ups and downs for the industry in general, with small sugar farmers always finding themselves at the losing end.

But even at its lowest, raw and refined sugar prices are still more expensive than the global average, no thanks to the absence of an honest-to-goodness program that would increase sugar production and productivity while at the same time lifting small-scale farmers and workers out of poverty.

From 2018 to 2021, the average wholesale price of refined sugar was relatively stable at P2,100 to P2,500 per 50-kilo bag but last year, it surged to P4,559.55 per bag in February. In local groceries, sugar prices reached as high as P136 per kilo in May of last year. 

On the other hand, it has just been reported that the SRA is now planning on some interventions to lift the prevailing millsite prices of raw sugar that have fallen and remained below favorable levels for sugarcane planters.

Farmers do not benefit from high retail prices but they surely suffer from low prices when the retail prices are low.

Importations are very mere palliatives. What the country needs is a clear roadmap that would help the sugar industry get out of this vicious cycle.

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