SUGAR PRODUCTION in the Philippines for crop year 2019/2020 is projected to reach 2.1 million tons amid higher domestic consumption and as local prices remain higher than global levels, Fitch Solutions Macro Research said in its industry trend analysis.
“While unfavorable weather in recent months will lower yields and overall production in the short term, gradually decreasing sugar area due to prolonged labor shortages and rising competition from cheaper imported sugar will weigh on the industry in the longer term,” it said in the report published Dec. 12.
This projection is 4% lower than its previous production forecast of 2.2 million tons.
Target raw sugar production for this crop year is at 2.096 million metric tons (MT), down 5% year-on-year, due to factors such as weather conditions, and changes in hectarage of sugarcane planted, as well as if farmers were to shift planting other crops.
Fitch Solutions also projects that consumption will continue to increase as the domestic industrial market, or food manufacturers, continue to drive demand as they switch to sugar from high-fructose corn syrup (HFCS) due to tax imposed to drink sweeteners, which is higher for sugar-alternatives.
“The Philippines is still close to self-sufficient in sugar, with almost all of domestic output being consumed locally. According to the country’s Sugar Regulatory Administration (SRA), around 95% of total production is consumed by domestic industries, in particular industrial users such as beverage manufacturers,” the think tank noted.
The increase in tax is part of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which took effect January 2018. This imposed a P12 per liter tax in beverages that use HFCS, while a P6 per liter tax was imposed to beverages that use local sugar.
It also sees that exportation of Philippine sugar to the United States — which makes up about 5% of sugar production or about 140,000 tons — will continue despite local prices being well above the cost in the global market.
Fitch Solutions said local sugar prices will “remain uncompetitive by global standards” despite its projection of slightly higher global prices in 2020 at $13.5 per pound.
“The rise in global sugar prices is therefore not going to make the Philippines any more or less price-competitive. With sugar imports from Thailand rising, however, it is likely that cheaper imports will cap domestic prices to an extent,” it said.
SRA reported that as of the third week of November, the millgate price of sugar increased 1.83% to P1,516 per 50-kilo bag.
In the same period, sugar production was 216,996 MT, down from 305,850 MT the previous year. This is equivalent to 4.339 million 50-kilo bags, compared to 6.117 million 50-kilo bags a year earlier. This is due to factors such as prolonged El Nino, and farmers pushing back their milling activities. — Vincent Mariel P. Galang