Erratic weather seen cutting sugar output for crop year 2019-2020

March 3, 2020
Jasper Y. Arcalas (Business Mirror) | https://bit.ly/2wuwCMs

THE country’s raw sugar output could fall to 2.025 million metric tons (MMT), the lowest level in nearly a decade, as El Niño and rains battered plantations in key sugar-producing areas in the Philippines.

Erratic weather has been the Achilles heel of the sugar sector in recent years. Sugar output declined for two consecutive crop years (CY) after the Philippines produced a record-high 2.5 MMT in CY 2016-2017.

Based on government documents obtained by the BusinessMirror, latest Sugar Regulatory Administration (SRA) forecast indicated that sugar output in CY 2019-2020 may be slightly lower from the previous crop year’s 2.072 MMT.

The projected output is the lowest since CY 2009-2010, when it fell to 1.97 MMT due to the ill effects of El Niño, based on historical data from the SRA.

Industry stakeholders attributed the possible decline in the current CY’s output to adverse weather conditions and the contraction in lands planted with sugarcane. Latest SRA figures showed that total sugarcane areas is at 406,490 hectares, slightly lower than the previous crop year’s 409,714 hectares.

SRA Administrator Hermenegildo R. Serafica refused to comment on the latest sugar production forecast, but said the country has ample supply to cover domestic demand, including carry-over imported stocks.

“SRA is monitoring the actual sugar supply along with projected production and demand. There is enough supply to cover demand,” Serafica said via SMS.

“We have already done our importation early on to ensure enough supply and, on top of that, there is also sugar from the replenishment program under Sugar Order 4 and 4-A,” he added.

Government and industry sources told the BusinessMirror that officials and stakeholders assessed the latest forecast, and discussed the current sugar supply and demand situation.

“It’s variable. It’s just an estimate that can go lower or higher. But it may be helpful in the formulation of sugar policies,” SRA Board Member Roland B. Beltran told the BusinessMirror.

Millers’ estimates

The Philippine Sugar Millers Association (PSMA) agrees with the government’s estimates, saying that higher cane production will offset lower sugar recovery.

Based on latest SRA forecast, total sugarcane milled in CY 2019-2020 ending August 31, will reach 21.75 MMT, nearly flat from last year’s 21.744 MMT. However, sugar milling recovery would fall to 1.86 50-kilogram bags per ton cane (LKg/TC) from the previous crop year’s 1.91 LKg/TC.

Raw sugar output in Negros, top producer of the sweetener, is estimated to decline by 1.15 percent to 1.288 MMT, from 1.303 MMT. Sugar production in Luzon may decline by nearly 15 percent to 180,650 MT while output in Mindanao is projected to go down by almost 3 percent to 399,217 MT.

Eastern Visayas’s raw sugar production is expected to rise by 4 percent to 46,742 metric tons while output in Panay may reach 136,547 MT, 3.04 percent higher than the 132,515 MT it produced in the previous crop year.

“[Production] is almost flat. We hope we could recover with the help of increased tonnage. Although our LKG/TC is down our tonnage is up, so we might hit that [projected volume],” PSMA Executive Director Jesus L. Barrera told the BusinessMirror.

“For PSMA, our production [forecast] might be similar to that of SRA’s 2.025 MMT. We suffered more rainfall during harvest and drier conditions during planting, which affected our production,” Barrera added.

The government was forced to import 250,000 MT of refined sugar last year to augment domestic supply as local output was insufficient to meet domestic demand, particularly that of industrial users like food exporters and beverage makers. Some 170,000 MT of imported refined sugar are still in local warehouses, per  SRA data.

The government does not have an estimate for the country’s total sugar requirement but foreign agencies like the United States Department of Agriculture pegged Philippine consumption at around 2.3 MMT, while some industry players said it is at 2.5 MMT.
 

Headwinds

However, industry players and sources familiar with developments on the ground told the BusinessMirror that local sugar production may be lower than 2.025 MMT.

The country’s raw sugar output as of February 23 is at 1.208 MMT, down by 12 percent from the 1.374 MMT recorded in the same period last year, based on the latest SRA figures obtained by the BusinessMirror.

“Currently weather is way too wet. [Output] will be down this year,” said an industry player.

Another industry player estimated that total output in the current crop year could decline by an annual rate of 8 percent to 10 percent, as El Niño delayed planting.

Nonetheless, industry sources said there have been no dramatic spikes in sugar demand due to the slowdown in economic activities, which they attributed to the impact of Covid-19.

As of February 23, raw sugar demand is down 8 percent to 823,964 MT from last year’s 895,906.69 MT while demand for refined sugar declined by 13.35 percent to 514,434.55 MT, SRA data showed.

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