The Philippine Sugar Industry Amid El Niño: Production Exceeding Projection, Market Dynamics, Import Demands, Export Opportunity, and Raised Health Concerns on “Magic” Sugar

Sugar Output Exceeding Projection Amid El Niño

On May 12, 2024, the Sugar Regulatory Administration (SRA) disclosed that they initially projected sugar production to increase by 2.78% equivalent to 1.85 million metric tons (MT) for the crop year 2023-2024, up from 1.8 million MT in 2022-2023. However, as of April 28, 2024, sugar output had risen by 5.56%, reaching 1.9 million MT, surpassing the agency’s projection amid the ongoing El Niño. This increase stemmed from improved sugar production on 3,000 hectares (Ha) of sugar land in Mindanao. Despite the increased output, it remains insufficient to meet the country’s estimated demand of 2.2 million MT to 2.4 million MT, in addition to maintaining a healthy buffer stock level.

SRA data revealed that raw sugar supply rose by 26.5% from 449,541 MT in May 2023 to 568,734 MT in 2024. Meanwhile, refined sugar supply increased by 45.26% from 401,829.25 MT in 2023 to 583,694.10 MT in 2024 for the same period. As of May 5, 2024, the country’s combined raw and refined sugar supply increased by 35% from 851,370 MT last year to 1.15 million MT this year.

The unexpected rise in sugar production allows for a stable supply and prices of sugar in the market. However, the looming impact of El Niño in the coming crop year 2024-2025 may bring higher production costs and affect farmers’ profitability. Proactive measures, such as efficient irrigation systems and better soil management practices, are essential to mitigate the anticipated drought effects. Meanwhile, consumers will face increased costs for sugar and sugar-containing products due to the anticipated decrease in supply and higher farmgate prices. This strain on the market could result in higher grocery bills and potential shortages, affecting household budgets and industries reliant on sugar.

Mill Site Price Trend of Raw Sugar and SRA’s Price Stabilization  Program

SRA released their latest data on mill site prices of raw sugar for April, which decreased by 19.42% from Php 3,177.19 for every 50-kilogram (LKg) in 2023 to Php 2,560.14 LKg in 2024. Meanwhile, a monthly comparison of mill site prices for raw sugar showed a 7.02% decrease from 2,753.42 LKg in March. Also, SRA has initiated a program to stabilize raw sugar prices for farmers by temporarily withholding 300,000 MT from the market to maintain fair prices for consumers and support farmers. Traders can secure import allocations by purchasing raw sugar at premium prices. 

Call for Sugar Importation

On May 13, 2024, SRA Administrator and CEO Pablo Luis Azcona reported severe damage to the sugar industry in Western Visayas due to El Niño, significantly impacting Negros Occidental, which contributes 60% to 65% of the national sugar supply. The drought has affected 3,283 sugar farmers in the region, resulting in Php 215,700,114 in damages to sugar and molasses. Approximately 5,753 Ha of sugar land have been affected by the drought, with 4,705 Ha in Negros Occidental alone. Consequently, the province is expected to experience a 30% decrease in sugar production this year due to these extreme weather conditions.

On the same day, the United Sugar Producers Federation (UNIFED), a producer group, emphasized during a radio interview the need to import 185,000 MT to 200,000 MT of sugar to prevent a shortage in supply and stabilize market prices. UNIFED President Manuel Lamata stressed the importance of limiting imports to 200,000 MT to protect farmers’ mill gate prices once the milling season begins. Additionally, Mr. Lamata urged the provincial government of Negros Occidental to procure its own airplane for cloud seeding operations.

In response, SRA stated that the agency has devised a mechanism to determine if there is already a need to allow sugar imports in the country. Once sugar stocks hit a certain trigger point or fall below three months’ worth of buffer stocks, the SRA may consider opening up a sugar import program in which the agency plans to import refined sugar initially, but there have been suggestions from sugar refiners to include raw sugar as well.

A stable sugar supply would ensure that farmgate prices of sugarcane remain profitable for farmers while guaranteeing that industrial users and manufacturers have enough supply to run their factories. However, farmers should remain vigilant, as any decision on imports could affect local sugar production and market dynamics. Farmers need to stay informed about importation plans and collaborate with relevant authorities to ensure their interests are considered in any decisions made.

Raw Sugar Exportation

On May 14, 2024, SRA reported that they are preparing to assist the sugar industry in meeting the United States (US) raw sugar export quota of 24,700 MT, with the initial paperwork already underway and the first target shipment in June. Exporters who participated in Sugar Order No. 2, which called for the voluntary purchase of domestically produced sugar to stabilize farmgate prices, are pre-qualified for the program. Additionally, the US granted the Philippines an extra export quota of 25,300 metric ton raw value (MTRV) on top of the 145,235 MTRV quota for 2024. Millers and traders have volunteered to export 30,000 MT or 60,000 MT of raw sugar to the US. 

The initiative to meet the US raw sugar export quota presents a significant opportunity for sugar farmers as it could stabilize domestic prices and increase demand for their produce. With exporters and industry players actively participating, farmers stand to benefit from potentially higher prices and improved market access. However, if the quota is not met or there are logistical challenges, it could threaten market stability and farmers’ income due to price volatility from an oversupply of sugar.

“Magic” Sugar

On May 15, 2024, SRA emphasized in an interview the need to control the spread of artificial or “magic” sugar in local markets to safeguard consumers’ health. The agency expressed concern about high fructose syrup and chemical sweeteners, commonly found in refreshment drinks, which pose health risks, highlighting the importance of regulating these substances and ensuring transparency regarding their sources. While the SRA is unsure if magic sugar is being smuggled into the market, SRA Administrator Pablo Luis Azcona noted that 100% of its supply is imported. Despite potential health hazards, businesses often promote artificial sugar as a cheaper sweetening option.

The SRA’s emphasis on controlling the spread of artificial sugar signals a potential shift in market dynamics, with increased scrutiny likely affecting businesses that rely on such sweeteners. This could lead to a demand for alternative, healthier sweetening options and increased consumer awareness about the risks associated with artificial sugars. There may be a growing demand for natural alternatives, such as locally-produced sugar. This could present an opportunity for farmers to capitalize on consumer preferences for healthier options, potentially leading to increased demand and better prices for their products.