Press Releases

Press Statement on Sugar Prices and Supply, and Long-Term Changes to the Sugar IndustryRep. Joey Sarte Salceda

August 6th, 2022

Sugar prices domestically may marginally ease as sugar stocks increase during the milling season starting this month, but the easing will be transitory. In other words, we will continue to see elevated sugar prices until there is a significant infusion of new and cheaper supply. Imports will probably be what we need among industrial users and bottlers.

Last month, I made five recommendations to address domestic sugar issues, on top of importation:
(1) Zero required sugarcane biofuels under the Biofuels Act. This requirement can be suspended by Executive Action;
(2) Alcohol companies should shift to non-sugarcane sources, such as cassava;
(3) The SRA should optimize the ongoing milling season; the promised inspection of sugar inventories should be completed effectively;
(4) Sugary drinks should be restricted from public schools during the face-to-face class resumption;
(5) The Philippine Competition Commission should undertake more aggressive measures to ensure that traders do not collude with each other on supply.

Some sugary drink bottlers may be forced to shift to high fructose corn syrup if sugar supply remains unreliable over the coming weeks. HFCS is taxed at a higher rate under the TRAIN law (P6 per liter for sugary drinks, P12 per liter for those sweetened with HFCS), so we may begin to see price hikes there rather than companies stopping bottling.

On that note, the House Committee on Ways and Means will be conducting briefings with the Bureau of Customs on import levels of sugar and other sweeteners, and with the SRA on mandatory programs under the TRAIN law to boost domestic production.

On sugar exports, we do have a US Quota system where Philippine sugar producers are able to sell to the United States at a premium from regular world prices, but regular prices are around 30-40% cheaper than Philippine prices, so I highly doubt that there is significant incentive to do that in large quantities. I think most exporters are only fulfilling contracts.

On a final note, allow me to say that sugar is a politically and socially charged issue in the Philippines because the domestic sector is highly labor intensive. The sector employs close to 700,000 workers directly, or around 1.6 workers per hectare cultivated. Compare that to 0.53 workers per hectare of Riceland cultivated, or the 0.77 workers per hectare average for the entire agricultural sector. In other words, if we end up swamping the country with sugar imports, we will very likely kill a lot of jobs immediately.

This is a problem we can no longer leave to the next generation. Every country on earth that has focused on sugar monocropping eventually suffered economic tragedy. We must diversify our sugar farms, and we must diversify the regional economies that depend on sugar for employment. Both the Speaker and the Senate President are from sugar producing provinces. We can no longer defer structural solutions for the sugar sector. This is the time and the political moment for it.

I am not convinced that the solution is as simple as just freeing up the sugar imports sector. Indeed, our very segmented sugar sector – separating farming from milling from refining from trading – has led to massive costs of transport, logistics, and intermediation, with every stage having middlemen. This, of course, is on top of opportunity costs incurred from lack of economies of scope.

Our SRA has also been ineffective, historically, at developing the sugar industry, with very low program administration rates. Low utilization was why they have been given low allocations from TRAIN law revenues. As my good friend Ciel Habito would say about the agricultural sector at large, we have been focused on the harm reduction side of trade policy, without nurturing the domestic industries enough. I am hopeful that this will change under PBBM.

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