Is it boom or bust in sugar land? | Inquirer News

Is it boom or bust in sugar land?

/ 03:01 AM August 29, 2011

Bacolod City, Philippines—Favored by good weather, sugarcane fields in this sugar bowl province are ready for the milling of a bumper harvest ending the 2010-2011 crop year (September to August).

It would be a mistake to say that with this crop, Negros Occidental, which accounts for 57 percent of sugar produced in this country, is in the midst of another sugar boom similar to that of the 1960s.

That period brought prosperity to the cane planters and made the so-called “sugar bloc” the most powerful political kingmakers or lobby group in the postwar years.


Nowadays, the streets and highways converging on this capital of “sugarlandia” are full of trucks overloaded with cane being transported to the mills, and brand new SUVs (sport utility vehicles)—visible signs of an artificial prosperity for the planters.
Behind this bubble is an industry sitting on the fragile ground of uncertainty and instability that have plagued the sector since its collapse during the Marcos dictatorship and its sugar distribution monopoly policy entrusted to its cronies.


No agricultural product affects the lives of Filipinos more than sugar (rice comes only second), which they consume every day before they take anything when they wake up. No crop has affected our political affairs more decisively than sugar.

Thus, the current vicissitudes and good fortunes of the industry are matters of immediate concern to most Filipinos.

True, there is a surplus sugar, a bumper crop, sugar prices in the supermarkets are down (much to the relief of consumers); planters are not happy because they are not making much profit from the prices and the government is happy because it has something to crow about rather than merely bashing to death a discredited predecessor administration whose skeletons of alleged corrupt transactions are being dug up zealously (although the President of this new administration is not as industrious as its zealots in their effort to dig up dirt).

At a conference in Cebu last week, Agriculture Secretary Proceso Alcala triumphantly announced that the cane fields had produced 2.39 million metric tons of sugar for the last crop year, a hefty 21.3-percent jump from the previous season’s output.

Gov’t forecast upbeat

Alcala said the bountiful harvest allowed the Philippines to export at least 300,000 MT of raw and refined sugar this year, the biggest export volume since the 1990s.


“We have been making great strides in sugar production the past year,” he said. “This may well be the start of the country producing more than enough to meet the domestic requirements and quota obligations and also ensure that sugar farmers have a reasonable, sufficient, and ‘livable’ income.”

He said, “We want to continue being a net exporter, while at the same time work on being one of the biggest sugar suppliers in the Asean region.” In the 1970s, the Philippines was a net sugar exporter, selling as much as 2 million MT.

The sugar crop rode the crest of the spike in agricultural output driven by production increases in the rice and corn sector in the first semester of 2011. The agriculture sector grew by 5.8 percent in the first semester.

The rise in the output in rice, corn and sugar was attributed to the rains coming at the right time—conditions that did not allow the government to claim all the credit for the bumper harvests, mostly due to the munificence of nature and not because of extraordinary economic management.

The outlook of the revival of the previously moribund sugar industry is optimistic, as assessed by independent experts in the Asia International Sugar Conference in Cebu a week ago.

World market

After attending the conference, Peter Baron, executive director of the London-based International Sugar Organization, came here with glad tidings.

At a sumptuous dinner (where French wine was served) at the sprawling house of Enrique D. Rojas, president of the National Federation of Sugarcane Planters, Baron repeated the main points in his speech in Cebu, which cheered Negros millers, planters and administration officials, notably the able and competent Maria Regina Martin, a planter in Silay who heads the Sugar Regulatory Administration (SRA).

Baron said the Philippine sugar industry faced a bright future due to the increasing demand for sugar in Asia. The region’s annual growth for sugar is at 2 million MT, driven by increasing consumption in the emerging market of China, as well as in Indonesia, Japan and Malaysia, he said.

World production for the coming season is forecast at a surplus of 4 million MT, but such surplus stands to be offset by strong Asian demand.

If the Philippines can maintain its bumper production, its proximity to Asian nations, which are net sugar importers, can make the country a key sugar exporter in Asia, Baron said.

For crop year 2010-2011, raw sugar production as of Aug. 7 reached 2.44 million MT.

Domestic withdrawals were pegged at 1.2 million MT while the commitment to the US market is normally at 136,000 MT yearly, leaving a substantial volume available for export to the world market. China may import about 3 million tons in the 2011/12 while Indonesia may import about 2.6 million tons in 2011/12 as domestic output was unable to meet the country’s growing demand.


But Rojas, representing the planters, had a caveat. He said the sugar industry should upgrade and consolidate its sugar production capabilities. “Our mills should increase not only sugar recovery efficiency but should also improve the quality of sugar to make it at par with and acceptable in the world market,” he said.

That’s exactly the issue. Is the industry, with already antiquated facilities and not the most efficient and not the highest productivity record in the world, up to this task?

In a paper to the Cebu conference, SRA Administrator Martin (incidentally an Assumption alumna), made a cautionary note, pointing out that “domestic prices don’t really seem to follow the movements of the stocks of raw sugar.” As stocks deplete, she said, prices go up.

“Such stocks follow a similar up and down pattern each year, the peak production months of January to April and down during the rest of the year,” she said, pointing out the volatility of the domestic sugar prices.

An assessment of the Philippine sugar outlook by the US Department of Agriculture indicates that there is no growth in sugar consumption expected this year due to some shift in sugar substitutes.

Local sugar prices have softened from record levels in December/January due to significantly higher production achieved. The SRA has announced that the Philippines will be able to meet the latest increase of 60,000 MT in US sugar tariff rate quota allocations and that “there is no need to import any sugar this crop year.”


According to the latest production estimates released by the SRA, raw sugar production in crop year 2010/11 is projected to reach 2.3 million MT up significantly from a forecast of 1.88 million MT earlier this year. The increase was due to a price-driven expansion in area planted, coupled with favorable weather conditions.

The SRA estimates sugarcane production in 2010/11 will reach 2.7 million MT. Domestic sugar production in 2011/12 will likely remain at the same level.

Domestic sugar prices began rising significantly in mid-2010 to a record high of P3,084.31/50 kg bag for wholesale refined sugar in December. According to the SRA, the spike of domestic sugar prices was fueled by the escalation of world market prices and a delay in the start of the milling season.

Prices have retreated steadily in the first four months of 2011 due to the lifting of the government-imposed suggested retail program for refined sugar. Industry sources expect prices to remain soft for the remainder of 2011 through next year.

Prices of raw sugar climbed from P30.35/kilo in September last year to P50.26 in August this year, and the average for the period was P40.03.

According to a study by the University of Asia and the Pacific, the users of sugar are local consumers and the export market. Local consumers consist of household users, which account for 57 percent of domestic consumption; industrial users, 39 percent; and institutions (restaurants, bakeshops, etc.), 4.6 percent.

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Due to the vagaries of the international sugar market and the unpredictability of the weather, it’s best to be skeptical of the government’s scenario.

TAGS: Bacolod City

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