The Sugar Regulatory Administration (SRA) has called on the Senate for the immediate passage of the proposed Sugarcane Act to provide enabling environment for diversified sugar production, and make
the local sugar industry more competitive with the advent of free-trade agreements in the Association of Southeast Asian Nations (Asean).
During the hearing of the Senate Committee on Agriculture, SRA Administrator Ma. Regina Bautista-Martin said that the proposed legislation being pushed before the lawmakers shall benefit all sugar industry stakeholders, particularly the marginalized sugarcane farmworkers.
“The bill is aimed to provide the enabling environment to make sugarcane and sugar production viable, competitive and, as much as possible, diversified despite the reduction of its Asean tariff to 5 percent in less than a year,” Martin said.
Martin also 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.
Industry facing challenges
With cost of production a little higher than the Philippines’ neighboring competitors, the country’s sugar producers consider as a threat the possible entry of cheaper imported sugar to service the needs of Filipinos.
Under the Asean free-trade agreement, the country will have to reduce the tariff of imported sugar from 18 percent in January 2013, 10 percent in January 2014 and down to 5 percent in January 2015.
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, and accounts for about 62,000 farmers.
There are 29 operating raw mills with combined crushing capacity of 185,000 metric tons (MT) of cane a day.
There are also 14 refineries with combined capacity of 8,000 MT refined sugar a day, all operating adjunct to the raw mill. In terms of ethanol, there are only four 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 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. Martin earlier said that the Philippine sugar market is driven by market forces.
“There are producers of varying sizes; millers of varying market influence including millers who are also traders; and traders ranging from small local operators to big multinational players. This reality brings to fore a certain degree of weakness to compete in the fast changing atmosphere of world trade, where size matters,” she said.
In terms of farm sizes, 75 percent of farms have sizes less than 5 hectares and another 11 percent have sizes of 5 hectares to 10 hectares. Of the remaining farms, 11 percent have sizes 10 to 50 hectares and a mere 2 percent have sizes of 50 to 100 hectares, while only 1 percent with a size of over 100 hectares.
This fragmentation of farm holdings is largely because of the agrarian reform program adopted by the Philippine government. This has lead to decreased productivity, which is inherent in small-sized farms.
Small farmers usually do not have the financial capability to cultivate their farms to the fullest potential. Coupled with previous lack of government support to infrastructure, the small farmer will not be able to take advantage of economies of scale.
SRA board member Lito Sandoval said that without Sugarcane Act and the assistance it shall provide to the industry, there would be a contraction in production brought about by the entry of subsidized imported sugar.
For his part, lawyer Jesus Barrera of the SRA Sugar Board, pointed out that the proposed special economic zone for sugarcane would facilitate the establishment of diversified industries using sugarcane as raw materials, and will provide more employment opportunities for nearby communities and easier deployment of government support services to the producers, farmers and workers.