SUGAR REGULATORY ADMINISTRATION

In response to inquiries regarding the price and availability of sugar in the local market, the Sugar Regulatory Administration assures the public that the Philippines has adequate domestic supply as the industry enters peak milling season for Crop Year 2009-2010.

Retailers have warned, however, that they will be forced to stop selling sugar if they are forced to sell their new stocks at the current price ceiling of PhP38.00/kg. Industry observers, likewise, have expressed fears of a “drying up” of retail outlets in Metro Manila and Luzon if current stocks are not allowed to seek reasonably remunerative levels attuned to current market conditions.

It will be recalled that the DTI imposed a price ceiling of PhP38.00 per kilo of refined sugar, based on the prevailing retail price of refined sugar just before a state of calamity was declared after the onslaught of Typhoon Ondoy. This price, however, reflected the cost of sugar based on the average millgate buying price of PhP1,077.90 per 50kg bag, raw sugar, for week-ending September 06, 2009.
 
On the other hand, millgate prices of raw sugar had already started to follow world market price increases, rising to PhP1,197.67/bag for week-ending Sept. 13; PhP1,210.42 for week-ending Sept. 20, and PhP1,257.33 for week-ending Sept. 27. Under normal circumstances, these would have translated into average refined sugar retail prices of PhP40.32, PhP40.61 and PhP41.67 per kilo respectively for each corresponding week. Based on actual weekly millgate buying prices of sugar and a lag time of three to four weeks before the sugar reaches retail outlets, the reasonable retail prices of refined sugar this October corresponding to millgate prices three weeks before would have ranged between P40.00 and P42.00 per kilo.

SRA Administrator Rafael L. Coscolluela stressed that current sugar prices should take into account a combination of factors that are usually beyond the control of sugarcane farmers.

First, the cost of producing sugar has steadily increased over the last five years due to the rising cost of farm inputs, particularly fertilizers and fuel. On the other hand, price data from 2000 to 2008 will show that while nominal sugar prices had increased (from PhP21.95 to PhP30.02/bag), retail prices actually stagnated in real terms (from PhP21.95 to only PhP19.37/bag) over the same eight-year period. In short, producers have been spending more to produce cane but getting less for their sugar.
 
Second, the domestic price of sugar also reacts to fluctuations in world market prices. The price of sugar in the world market started to spike in May of this year and rose to a 28-year high of 23.22 cents per pound in October 2009. The current world market price translates to more than PhP 1,300.00 per 50-kilo bag of raw sugar, delivered in Manila wharehouses. That translates to more than PhP42.00 per kilo refined. (The SRA has recommended a price ceiling of PhP41.00/kilo for the duration of the calamity period.)

Third, a 7.9% increase in the price of sugar (from PhP38.00 to PhP41.00) would mean an increase of  21 pesos per person per year (or less than 2 pesos a month) in an average household. In contrast, it can impact heavily on the viability of the sugarcane farmers (89.4% of whom till less than 10 hectares) who have been through a difficult year that saw drastically lower production (average 14% decrease) and low prices (11 % lower than the previous year).

Administrator Coscolluela, during the November 11th NPCC meeting presided by VP Noli de Castro and Secretary Peter B. Favila of DTI, stressed that the price of P41.00 / kilo of refined sugar does not provide for any unreasonable profit on the part of any player, the trader or the retailer.