Sugar industry prepares for low AFTA tariff
The current year will be a challenging year for the Philippine sugarcane industry, being the start of slashed tariffs on imports, but government and stakeholders are eyeing better opportunities to survive beyond 2015, the Sugar Regulatory Administration (SRA) said.
This year is the start of the full integration of the Asean Economic Community. The tariff on imported sugar from Asean countries is now down to 5 percent from 18 percent last year and 28 percent the previous year.
“The industry will remain formidable,” SRA Administrator Ma. Regina Bautista-Martin said
Martin said that each sector of the industry has its own challenge to face under AFTA.
“Farmers need to reduce their 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 don’t flood the domestic market,” she said.
Anchored on the sound principle of “doing more with less,” the government is taking the lead in flourishing the industry by means of strengthening the small farmers through block farming, credit and financing schemes in cooperation with Department of Agriculture, the Department of Agrarian Reform and Land Bank of the Philippines.
The SRA chief stated that without any financial assistance from government, the industry and the whole sugarcane value chain will shrink leading to the displacement of workers and declining economic growth of major sugarcane-producing provinces.
At the same time, investors in biofuels, ethanol and other allied trades are given the green light to continue their initiatives towards a more resilient sugarcane industry.
“The industry has to improve its farm productivities and industrial efficiencies to maintain net sugar exporter status and SRA will take care of the rest,” Martin said.
Also, with the impending passage of the sugarcane industry development act of 2015, which cleared the House Bicameral Committee, it is expected that a more vibrant industry for all stakeholders be at hand.
The Act also strengthens the power of SRA to classify imported sugar while maintaining its regulatory power under Executive Order 18, series of 1986.
With cost of production a little higher than neighboring competitors, the country’s sugar producers consider the possible entry of cheaper imported sugar to service the needs of 96 million Filipinos a threat.
Martin, on the other hand, gave a neutral outlook in world sugar situation, noting that the global downtrend of sugar prices seemed to have little production response—meaning low prices in the world market did not affect much the farmer planting decision.
Prices at the domestic market in December averaged at P1, 450 per bag of raw sugar. This is more than double the price of world market or “D” sugar.
SRA is confident that 2014-15 sugar production will hit the target of 2.5 million metric tons and domestic prices will be maintained at the P1,400-1,500 price levels to offset the effect of falling world prices.
“The world sugar balance is still at a surplus thus, world market prices are still down—and the domestic market is helping support the industry. This should continue within the first half of the year,” Martin added.
The Philippine sugarcane industry provides employment to the agriculture sector, the processing sector, the trading sector, the farm and industrial input suppliers such as fertilizer and lime manufacturers and suppliers, suppliers of processing chemicals, suppliers of farm machinery and local fabricators, repair shops and all those which comprised the entire sugarcane value chain.
The sugar industry contributes no less than P70 billion to Philippine economy annually. Out of the total land area of about 30 million hectares, sugarcane is planted to about 422,500 hectares in the Philippines, with about 62,000 farmers.
There are 29 operating raw mills with combined crushing capacity of 185,000 metric ton cane per day.
There are also 14 refineries with 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 1 distillery in Luzon, 4 sugar mills in Mindanao, and the rest are located in the Visayas region, which produces about 65 percent of the country’s sugar output. The biggest sugarcane hectarage is in the Visayas, particularly in Negros island, followed by the fast-growing area of Mindanao.
The Philippines, as a signatory to the Asean Free Trade Area (AFTA), has started reducing tariff for the sweetener to 18 percent at the beginning of 2014, from 28 percent a year ago.
AFTA, which will take full effect in 2015, aims to bring down to zero the duties on products— including sugar—coming from Asean countries.