August 17, 2015
Sugaronline | http://goo.gl/VDfi15
Sugar Regulatory Administration Ma. Regina Martin has urged capitalists to consider investing in the sugarcane industry, according to the Philippines’ Visayan Daily Star newspaper.
The passage of the Sugarcane Industry Development Act authored by Rep. Alfredo Benitez and Senator Cynthia Villar has expanded the usage of the sugarcane and has provided incentives to entice investors.
In her speech before the 62 nd Annual Convention of the Philippine Sugar Technologists Association in Cebu last week, she painted a grim view of the near term prospects of the industry from the traditional consumer side. We always think of sugar for our table, for pastries and cakes, for candies and drinks and other food processing but this time the call is for the extraction of the cane juice for fuel.
The call for investment into other products from sugarcane is not new, though for a different reason. The Philsutech was in fact organized in 1932 by Dr. Carlos Locsin, the chemist of Victorias Milling Co. to find means to salvage 453,405 tonnes of excess sugar that could not be exported to the Unites States, the only world market of Philippine sugar. The destruction of this sugar was dictated by the Sugar Limitation Act which was condition precedent for the grant of Philippine Commonwealth status in 1934 and total independence in 1946.
Today the call is to diversify the use of sugarcane juice came at the time where there is not enough of it for domestic consumption. World sugar prices are doing down or could reach the profitable bottom, at least for now or the next five years.
This is ironic. If our production next year at most would reach 2.35 million tonnes according to SRA estimate and our consumption is about 2.2 million that leaves us a small volume for the ethanol plants. If the estimate falls to less than SRA's low expectation of 2.25 our domestic market will be in a precarious situation. This is granting that the US prediction of a long drought next year does not happen.
Administrator Martin is right when she said “the industry needs to invest in techniques that will increase yield per hectare, consolidate farms to plantation of economical scale, provide technical advice and examples of good farming practice to farmers, and programs that will convert sugarcane farmers into agri-businessmen.”
This is the formula but this has been the call of the industry for a long time. In fact because this formula was unheeded for decades national production remains flat. The estimate for 2015/16 is lower than the previous years. If there has been no shortage in the retail market, some people believe that the slack is being filled in by smuggled sugar.
Just before the milling season closed, SRA classified all the sugar to the domestic market, foregoing even our US quota that ironically was increased at the time when we have little sugar to spare.
Considering this emerging scenario the call of Administrator Martin is already late in the day, not that she had not issued the warning earlier but that the response has been lackluster.
Increasing the commitment of sugarcane to ethanol plants is fine if we have enough sugar for the table. If the ethanol plants lacked the canes there would not be a national howl but if sugar for home consumption falls below demand there will a loud outcry and call for importation. This will create another cycle that is bad for the industry but good to traders.
Compounding this hesitation to invest in the industry, not just for the ethanol plants which are dependent on the farm production is the instability of land ownership. Who would invest on land where there is no permanence? The SRA program of block farms are models for what plantation cultivation is but the program moves slowly because their success depends on government intervention and the government can only do so much.
Moreover the 30 hectares block farm needs to be expanded and even if there are private entrepreneurs that come into the sugar cultivation the issue of stability remains. No nation has ever succeeded in agriculture without this stability of ownership. Unfortunately for the Philippines the CARP undermined of this stability and plantation cultivation.
Private investments can only attract if there is, to repeat, stability of land ownership or long term leases. Farm size is vital for the adoption of technology and financing technology requires stability.
SRA should spell out how investments in farm productivity will be implemented because SIDA is unclear in this and how this will impact of CARP lands.