THE Sugar Regulatory Administration (SRA) is studying the possibility of higher sugar exports to the United States to take advantage of Washington’s preferential rate now that trade relations between the US and Mexico are at a crossroads under the Trump administration.
In a text message, SRA Administrator Ana Rosario Paner said they are closely monitoring US-Mexico relations to prepare the local sugar industry for a possible increase of shipments to the US.
“Mexico wants to export more but I think [the]US is non-committal. So if [the]US doesn’t allocate any quota to Mexico, then other sugar producing countries like the Philippines may be considered for additional allocation,” she said.
The Philippines is one of a select group of countries given an annual allocation of sugar exports to the US market at a premium under a tariff-rate quota.
Manila currently has a regular US quota of 136,827 metric tons (MT) for crop year 2016-2017. The volume may increase depending on Washington’s requirement during a particular season.
Tariff-rate quotas allow countries to export specified quantities of a product to the United States at a relatively low tariff, but subject all imports of the product above a predetermined threshold to a higher tariff.
US President Donald Trump, who took office on Friday, vowed to redo the North American Free Trade Agreement, credited for revamping Mexico’s economy. The campaign rhetoric has caused serious concern in Mexico as the United States is by far its largest trading partner.
Mexico currently is the leading foreign source of sugar for the US market, supplying about 10 percent of total supply, so any changes to the agreement could have important implications for stakeholders in the American sugar market.
Lower US export this crop year
On Monday, Paner said that the sugar board has slashed the sugar allocation to the US from the previous 8 percent to 6 percent of total production amid uncertainties about an additional supply agreement with Washington—at least for the current crop year.
She said the domestic market remains the priority market for locally produced sugar in order to maintain a comfortable buffer or carry-over volume of “B” sugar during the end of season and to ensure stable supply and prices for the start of the crop year.
“Our US quota is about 136,000 MT. The sweetness of our sugarcane should be first enjoyed by our kababayans [compatriots],” Paner said in her text message.
The sugar agency earlier allocated 92 percent for domestic use and 8 percent for the US market in anticipation of an additional supply requirement from Washington.
“They are not making any commitments since there is a new administration,” Paner said.
To date, about 225 MT of sugar has been loaded onto US-bound barges with two boatloads expected to leave port next month.
Sugar production for crop year 2016-2017 is forecast to reach 2.25 million MT, higher than the 2.236 million MT produced in the previous crop year.
The production target for this crop year is also expected to cover the domestic requirement of 2.15 million MT.
A sugar crop year in the Philippines starts in September and ends the following August.
PH can export as much as 500,000 MT
Rosemarie Gumera, SRA policy and planning manager, earlier said that the Philippines can export as much as 500,000 MT of sugar as the industry works on increasing production within the next five years.
“We are now at 55 tons cane per hectare in terms of production. Under the sugar roadmap, we are targeting to hit 70 tons cane per hectare by 2020,” she said.
“If we will be able to hit this capacity, we can ship as much as 500,000 MT of sugar,” she added.
Gumera also said they are looking at beefing up the country’s ethanol production alongside food production to keep the sugar industry competitive.
“We want to ensure the survival of the local sugarcane industry. The industry has to improve its farm productivities and industrial efficiencies to maintain net sugar exporter status,” Gumera said.
SRA has been looking for opportunities to survive beyond 2015, which marks the start of the full integration of the Asean Economic Community. Starting last year, the tariff on imported sugar from Asean countries was brought down to 5 percent.
Amidst the threat of a 5 percent tariff imposition on sugar importation under the Asean Free Trade Agreement (AFTA), the SRA said each sector of the industry will face challenges—farmers need to reduce cost of production; the millers need to be more efficient; the traders need to stay on top of the market; and the government must use all means in ensuring that cheap imported sugar does not flood the domestic market.
The government is helping strengthen the small sugar farmers through block farming, credit and financing schemes in cooperation with the Department of Agriculture, the Department of Agrarian Reform and Landbank of the Philippines.
The sugar industry contributes about P70 billion to the economy annually. Out of the country’s total land area of about 30 million hectares, sugarcane is planted to about 422,500 hectares, iwith about 62,000 farmers.
There are also 14 refineries with a combined capacity of 8,000 metric tons refined sugar per day, all operating adjunct to the raw mill. In terms of ethanol, there are only 4 bioethanol distilleries, with total annual rated capacity of 133 million liters.
Geographically, there are seven sugar mills and one distillery in Luzon, four sugar mills in Mindanao, and the rest are located in the Visayas, which produces about 65 percent of the country’s sugar output. The biggest sugarcane hectarage is in the Visayas, particularly on Negros Island, followed by the fast-growing area of Mindanao.