Sugar supply tightens

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Production target exceeded despite El Niño, but more imports likely
THE country’s sugar sector performed better than expected, surpassing its production target for the current crop year amid the prevailing dry spell brought about by El Niño, but imports will still be needed to address tight supply, the Sugar Regulatory Administration (SRA) said over the weekend.

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Rosemarie Gumera, SRA policy and planning manager, said sugar production for crop year 2015-2016 reached 2.2 million metric tons (MT), exceeding the 2.15 to 2.19 million MT target.

Gumera, however, said that the production remained well below the 2.32 million MT recorded in the previous crop year.

“Production was slightly higher than what we expected. We do not expect it to increase significantly until the crop year ends,” Gumera said, noting that only one sugar mill in Luzon remains in operation.

A sugar crop year in the Philippines starts September and ends August.

The SRA set sugar production output for this crop year at 2.25 to 2.35 milion MT, roughly the same level as last year’s, but was forced to lower expectations at 2.15 to 2.19 million MT as El Niño intensified late last year.

Drought was reported to extend until mid-2016, but sugarcane production started to pick up thanks to favorable weather conditions in the Negros region, the biggest sugar producing area in the country.

With production falling flat at 2.2 million MT, tightness in supply is expected to continue over the next few months. Local consumption of sugar is pegged at 2.2 million MT.

To stabilize prices and to bolster domestic supply to satisfy demand, Manila may look into another round of importation from the world market.

SRA Administrator Ma. Regina Bautista-Martin earlier said that they are mulling the importation of 50,000 MT to 100,000 MT of sugar to temper speculations amid tightness in supply caused by the prevailing dry spell.

The SRA has yet to finalize the importation plan. If approved, it will be the second time that Manila would allow foreign suppliers to bring in sugar to the country.

Confectioners’ call
The proposal coincides with the call of a group of confectioners to allow the importation of sugar in a bid to cut down on costs.

The Philippine Confectionery Biscuit and Snack Association (PCBSA), in a statement, said its officers, led by William Lim, have met with Trade Undersecretary and Board of Investments (BOI) Managing Head Ceferino Rodolfo to advocate the proposal to allow the importation of sugar.

PCBSA argued that imported sugar is 50 percent cheaper than locally produced sugar. Lim noted that local sugar costs P2,500 per 50 kilogram (kg) bag, which is more than double the price of imported sugar that costs only P1,200 per 50 kg bag.

Lim underlined that allowing the importation of cheaper sugar would help the country’s confectioners cut down on costs.

Despite entering various free trade agreements, PCBSA members are not allowed by the government to import sugar to meet their own production requirements.

Should there be no move to reduce their production costs, the PCBSA said the market share of local confectioners may go down while the market share of imported confectionery items which has already increased to 25 percent as of the end of 2015 from only five percent in 2010.

The PCBSA is worried that the survival of the local confectionery industry is at stake if there are no move to reduce the costs of production.

Justifying importation
The SRA earlier allowed sugar importation to help maintain a healthy buffer stock as local exporters and traders attempt to fulfill Manila’s commitment to export sugar to Washington under the tariff quota scheme.

The Philippines is one of the select countries given an annual allocation of sugar export to the US market at a premium. For this crop year, Manila has a regular US sugar quota of 135,508 MT.

Tariff-rate quotas allow countries to export specified quantities of a product to the US at a relatively low tariff, but subject all imports of the product above a pre-determined threshold to a higher tariff.

Under the program, SRA will allow the export of ‘B’ sugar or domestic sugar to ‘A’ sugar or US quota, while importation of sugar as replacement for the volume exported to Washington with a small addition of about 33,000 MT to cover the drop in the initial production estimate.

Only participants of the program are allowed to replace the sugar exported with imports. Traders can import 1.25 MT of sugar for every 1 MT exported to the US.

To date, the Philippines has shipped 135,508 MT of the commodity to Washington, filling up the regular U.S. sugar quota under SRA’s export replacement sugar.

WITH REPORT FROM KRISTYN NIKA M. LAZO

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