CANE POINTS: Sugar Smuggling Threatens Next Crop Year’s Millgate Prices

According to the Sugar Regulatory Administration’s Sugar Supply & Demand Situation for Week Ending July 4, 2021, raw sugar stock stands at 376,513 mt.

On the other hand, refined sugar supply is at 284,420 mt. Presuming that the 110,646 mt raw sugar transferred to the refineries, as of July 4, 2021, is all processed into refined sugar, total physical refined stock will amount to 395,066 mt.

It is practically the end of the milling season, and these supply figures will not change much. With the crop year officially ending by August 31, do we have sufficient sugar stocks until the mills start grinding sugarcane again by September 1?

Raw sugar withdrawals for the past 10 months (September 2020 to June 2021) amounted to 1.7 million mt, or a monthly average of 170,000 mt, while, refined sugar withdrawals amounted to 847,246 mt, or a monthly average of about 85,000 mt.

Two months until start of next milling season, plus another month for Negros mills to get into full blast production. Three months, at least, before “normal” production resumes.

Refined sugar stocks appear sufficient until the refineries get into their groove next crop year. At an average monthly withdrawal of 85,000 mt, that’s only 255,000 mt projected demand for refined sugar in the next three months. The presumptive refined sugar stocks stand at 395,066 mt, which is enough for five months’ supply.

Raw sugar supply is another story. Even if augmented by imports from Sugar Order No. 3, Series of 2020-2021 (“A” Sugar Export Replenishment Program), raw sugar supply can’t last for three months.

At an average monthly consumption of 170,000 mt, that’s 340,000 mt in two months. Raw sugar supply, as of July 4, is only 376,513 mt, leaving a meager 36,513 mt raw sugar by September 1.

The 13 sugar centrals in Negros usually mill ahead of the other 14 mills in the country. However, not all Negros sugar mills start crushing at the same time. Even if they do, they account for a little more than 60% of the national production. Thus, they cannot be expected to fill the 170,000 mt raw sugar demand for September.

Issued last June 3, SO# allows exporters of “A” sugar to import an equivalent volume of what they actually shipped to the US. As of July 4, 104,012 mt has been exported to the US, with about 5,200 mt set to be shipped from Bredco this July. That totals about 110,000 mt, which can be imported from the world market into country, under SO#3.

This 110,000 mt allowable importation cannot arrive in the country all at once, considering the nature of the commodities world market, exacerbated by shipping delays due to Covid restrictions and port congestions.

SRA mandated a July 1 to October 31 window for these imports to arrive. Thus, these imports will only trickle into the country in volumes which most likely cannot fill the local demand starting September up to October.

Will this tightness in raw sugar stocks translate to higher millgate prices next crop year? All sugar producers hope so, but smuggling, the industry’s long-time scourge, once again rears its ugly head.

Two weeks ago when imports under SO#3 started arriving, the Bureau of Internal Revenue in Cebu reported that some traders are importing sugar at much higher volumes than what is allowed.

This prompted Finance Secretary Carlos Dominguez III to immediately direct the Bureau of Customs to step up the drive against sugar smuggling.

Enrique D. Rojas, president of the National Federation of Sugarcane Planters (NFSP), commended Dominguez for his swift action.
“When SRA instituted the ‘A’ sugar export replenishment program early last June, NFSP already warned that some traders might exploit the program to smuggle imported sugar in much higher volume than what is allowed,” Rojas said.

“If smuggled sugar floods the domestic market, it will bring down sugar prices. Consequently, it will result to low millgate prices at the start of the next milling season, resulting to huge losses to our farmers,” he explained.

Rojas urged SRA, Customs and BIR to exercise utmost vigilance to ensure that only the exact allowable volume of sugar is imported by traders under SO#3.

“Our sugar producers have been suffering from low millgate prices in the current crop year. We hope government will help us ensure, next crop year, a more reasonable level of prices, which are favorable to consumers and fair to the producers,” Rojas stressed.

The world market is a dumping ground for highly subsidized sugar from some sugar-producing countries, who sell sugar at prices lower than the actual world average production cost. This disparity between the domestic and world market prices provides an incentive for unscrupulous importers to smuggle sugar.

Government should fulfill its mandate of protecting local producers from the scourge of the smugglers. But considering that there’s an election next year, and some people need campaign funds, well… sugar producers shouldn’t hope too much.*

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