Before the issuance and eventual recall of the infamous Sugar Order 4, which called for the importation of an additional 300,000 metric tons (MT) of sugar, there was SO 1 that came out before September 2021. Prior to the start of a crop year for sugarcane, the Sugar Regulatory Administration issues SO 1, which indicates the projected output as well as the allocation of the domestic production. The SRA Board consults sugar producers before SO 1 is crafted and released.
SO 1 for crop year (CY) 2021-2022 was issued on August 27, a few days before the end of the previous crop year for sugarcane. SO 1 had already signaled the possibility that sugar supply would be tight. It indicated that sugarcane output for the current crop year, which will end on August 31, would reach 2.099 million metric tons, nearly 2 percent lower than the 2.138 MMT produced in CY 2020-2021 (See, “SRA order allots 2021-2022 sugar output for domestic consumption,” in the BusinessMirror, August 31, 2022).
The expected decline in sugarcane output prompted the SRA Board to allocate the entire production volume to domestic use, classifying it as “B” sugar. In recent years, the classification of local sugar was whittled down to only 2-A (for export to the United States) and B (for domestic use). Classifying the entire production volume as “B” meant that the Philippines will not export sugar to the US under the tariff rate quota system.
A paper released by the Philippine Competition Commission indicated that the sugar order of the SRA mandates mills to divide all planters’ shares and mill shares into various classifications according to given percentages. The paper noted that the classification is justified under the SRA mandate of maintaining a balanced relation between production of sugar for local consumption, exports, and strategic reserve, as well as ensuring price stability.
La Niña was blamed for the expected lower sugarcane output in CY 2021-2022. In SO 1, the SRA Board noted that the state weather bureau had announced the reemergence of the La Niña phenomenon in the country either in late October or November 2021 until the first quarter of 2022. La Niña, the SRA said, would affect almost all sugar-producing provinces at their start and peak milling for the current crop year and result in low sugar recovery.
Typhoon Odette, which devastated the Visayas region, compounded the production woes of the local sugar sector. Odette, regarded as the strongest storm of 2021, ravaged sugar plantations in major sugar-producing areas. Official government data indicated that more than 50,000 hectares of sugarcane plantations were hit by Odette, causing planters and millers to incur P1.5 billion in losses (See, “Skyrocketing sugar prices stoke industry liberalization stakes,” in the BusinessMirror, August 4, 2022).
SRA data reveal the extent of the damage caused by climate change and other challenges such as rising fertilizer prices. As of July 31 this year, the country’s raw sugar output declined by 16 percent to 1.792 million metric tons, from 2.138 MMT recorded in CY 2020-2021. The country ended the month of July with significantly lower stocks—raw sugar inventory was down by nearly 50 percent, while that of refined sugar fell by nearly 26 percent.
The SRA Board is supposed to issue SO 1 again for CY 2022-2023 before September 1, or the start of the new crop year. We hope that the resignation of the SRA chief and other members of the sugar board as well as the controversy generated by SO 4 would not delay the crafting of new policies. A delay would be costly to many industries as well as consumers who are now shelling out more for basic goods and commodities.