Bright Prospects In Sugar Industry

There are a number of developments that point to a rosy future for the local sugar industry. These were cited by a top executive of a leading company engaged in the sugar industry.

He is Archimedes B. Amarra, vice president of Roxas Holdings, Inc. for marketing, trading, corporate planning and corporate strategy. He also served as a board member of the Sugar Regulatory Administration, and in other capacities in a number of foundations or agencies involved in the sugar industry.
One recent significant development was the ability of the country to diversify the foreign market for Philippine sugar. Another was the effective curtailment of smuggled or unauthorized entry of sugar from outside sources.

Amarra cited that in crop year 2010/11 sugar production reached 2.4 million tons which was a significant increase from the previous year’s production of 1.97 million metric tons. To prevent the undue drop in price for locally produced sugar, the SRA was aggressive enough to look for markets abroad. SRA was able to negotiate with the US for additional purchases. The Philippines originally had an allocation of 138,000 tons for 2011-2012, but the shipment from Sept. 3, 2011 to July 5, 2012 had increased to 163,900 tons.

In addition to the increased shipment to the US, the SRA’s marketing efforts resulted in the shipment of 361,663 tons (D sugar) to Japan, China and Indonesia in the same period.

Amarra said that SRA’s efforts were an effective market diversification move to meet a potentially problematic overflow of production carryover from the previous year.

The Bureau of Customs’ efforts in curbing sugar smuggling also contributed to the stabilized price range for domestic raw sugar (millgate) in the vicinity of P1,300 per Lkg (50-kg sugar) in the first half of crop year 2011/12.  Official data from Thailand reported that the volume of sugar exported to the Philippines was about 126,829 metric tons for the period of November 2010 to October 2011 while the reports from the SRA indicated that the agency allowed the importation of 117,000 metric tons for the same period. This is a very significant reduction from previous estimates of 200,000 to 300,000 tons of illegal or unauthorized entry of sugar each year.

Amarra cites one more indication pointing to the bright prospects of the sugar industry. This is the positive market response to the relisting of Victorias Milling Company at the Philippine Stock Exchange, which means that the sugar industry is getting a serious second look from the business sector. He cites reports in media that the Metro Pacific group of Manuel V. Pangilinan is keen in getting into the sugar business.

Amarra considers as the foremost challenge to the sugar industry the decelerating rate of AFTA tariff on sugar imports from 38% in 2011 to 18 percent in January 2013, down to 10% in January 2014 and then 5% in January 2015.

He is optimistic, however, that the local sugarcane farmers can meet the challenge. He said that since 2010, the industry embarked on the implementation of the master plan for the sugar industry in conjunction with the SRA Road Map. The twin objectives of cost competitiveness and profitability were set. A cost of US 14 cents per pound (or about P750 per LKg was set as the bottom line. At this level, producing sugar in the country should provide sufficient returns to both farm and industrial sectors despite competition from the expected imports come 2015.

The targets, Mr. Amarra says, are an acknowledgment that fluctuating world prices (and therefore import prices) cannot be accurately forcasted nor influenced by the local industry. As of the middle of 2012, nine sugarcane producing areas or districts have reported average costs of production at about or below the mark mentioned above. Many more areas, however, need to shape and are forecasted to catch up with the implementation of more projects to support efforts at the farms and the factories.
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