February 18, 2025
It looks like the government is again resorting to band-aid solutions to address the long-running problem of the country’s sugar sector.
The Sugar Regulatory Administration (SRA) board — under a draft order — plans to implement a voluntary purchase program for crop year 2024-2025 which would involve the purchase of 300,000 metric tons (MT) of raw sugar at a premium on a first-come, first-served basis. Under the program, the sugar bought would be off limits to domestic market sale in no more than 90 days, thus reducing supply. The program aims to increase farmgate prices of the sweetener.
This strategy is designed to reduce supply temporarily, thereby increasing farmgate prices to more sustainable levels. Under this voluntary purchase program, eligible traders can buy raw sugar at a premium price, with the incentive of receiving priority in future government sugar import programs. This approach was first implemented in the 2023-2024 crop year, which withheld over 260,000 metric tons of raw sugar from the market to stabilize farmgate prices.
Vantage Point sees this move as a short-term boost for farmers, even as it perpetuates market instability. These stopgap solutions do not address underlying issues like production inefficiencies, the lack of infrastructure, and monopolistic practices in the market.
Through the years, the government has been instituting market interventions. Despite these, the industry continues to face significant hurdles. The adverse effects of climate change, market volatility, and competition from alternative sweeteners remain pressing concerns.
The Philippine sugar industry has long been a vital component of the nation’s economy, providing employment and contributing to both domestic consumption and export revenues. The sector supports approximately 700,000 workers across 20 sugar-producing provinces, with over 90,000 farmers directly engaged in sugarcane cultivation. In recent years, however, the industry has faced a series of challenges that have impacted production, pricing, and overall stability.
Behind the struggles
As of 2023, the Philippines produced approximately 1.85 million metric tons of sugar, ranking 17th globally in sugar production. This marks a decline from 2005, when the country was the ninth-largest sugar producer worldwide and the second-largest among ASEAN nations, following Thailand. The country currently has about 14 sugar mills and 7 refineries in operation, with milling efficiency averaging only 1.8 to 2.0 LKg/TC (50-kilogram bag of sugar per ton of cane), significantly lower than competitors like Thailand, which achieves around 2.4 LKg/TC.
Several factors have contributed to the Philippine industry’s recent struggles:
- Climate adversities: The El Niño phenomenon has severely affected key sugar-producing regions, particularly Negros Occidental, which accounts for 60% to 65% of the national sugar supply. As of May 2024, drought conditions had impacted over 3,283 sugar farmers in Western Visayas, leading to damages exceeding P215 million and affecting approximately 5,753 hectares of sugarcane fields.
- Market dynamics: The country’s annual sugar demand is around 2.2 million metric tons, creating a recurring supply deficit that necessitates sugar imports. Fluctuations in global sugar prices, competition from alternative sweeteners, and high production costs have posed significant challenges. In the past five years, domestic sugar prices have remained 50% to 80% higher than world market prices, making locally produced sugar less competitive.
- Cycle of band-aid solutions: The government’s reliance on temporary measures, such as manipulating supply, offers only a short-term boost for farmers while perpetuating instability. These stopgap solutions do not address underlying issues, such as production inefficiencies, the lack of infrastructure, and monopolistic practices in the market. This cycle of band-aid solutions must end.
- Inadequate farmer support and training: Reducing post-harvest losses and increasing efficiency necessitates making major improvements in farm-to-market roads, storage facilities, milling facilities, and transport networks. It is urgent that fair market pricing and competition be instituted as well.
The problems facing the country’s sugar industry are deeply rooted and structural. As such, the remedy should not be surface-level. The Philippines has one of the highest sugar production costs in the region, estimated at P1,800 to Ph2,000 per 50-kilogram bag, compared to Thailand’s P1,200 to P1,400. This is due to outdated farming methods, a severe lack of mechanization, and poor infrastructure.
To solve these problems, economists and agricultural and policy experts have articulated the following proposals:
- A balanced trade policy should be part of the solution. We need to implement a predictable and transparent sugar import policy that ensures supply stability for sugar end-users without unfairly disadvantaging local farmers.
- There must be a long-term commitment to modernization and policy reforms. Without such reforms, the industry will remain vulnerable, and consumers will continue to bear thebrunt of rising prices. These reforms should include:
Improved farm-to-market roads, better storage facilities, better milling facilities, and transport networks: This will reduce post-harvest losses and increase efficiency.
Fair market pricing and competition: Promoting fair pricing and competition ensures access to a wider range of products and services at competitive prices, prevents monopolies, and encourages innovation. This will benefit consumers and foster a healthy economy.
Balanced trade policy that includes predictable and transparent sugar importation: This will ensure supply stability for sugar end-users without unfairly disadvantaging local farmers.
Modernization and mechanization: Adoption of advanced farming techniques, high-yield crop varieties, and mechanized planting and harvesting to reduce costs and increase efficiency. Currently, only 10% of sugarcane farms in the Philippines use mechanized equipment, whereas in Thailand, over 70% of farms are mechanized.
Infrastructure development: Investment in irrigation systems, transport networks, and state-of-the-art milling facilities to optimize production and distribution. An estimated 34% of sugarcane fields rely solely on rain-fed farming, making production highly vulnerable to climate variability.
Research and development: Strengthening collaborations between the government, private sector, and academic institutions to develop innovative and sustainable sugar production methods.
Diversification and value-addition: Exploring alternative revenue streams such as ethanol production, bio-based commodities, and sugarcane-based products to enhance economic resilience. Brazil generates over 50% of its vehicle fuel from sugarcane ethanol, demonstrating the potential for diversification in the Philippines.
Stronger institutional support: Establishing policies that protect small-scale farmers, prevent monopolistic practices, and promote fair trade to create a more equitable market environment.