Local producers will be allowed to export more sugar to the United States at preferential tariff rates after Washington increased Philippine raw sugarcane allocation for the current fiscal year by 63,830 metric tons (MT).
The US Trade Representative (USTR) announced the additional allocations under its tariff-rate quota (TRQ) system in two statements it released on July 31.
Of the additional volume, 48,898 MT was granted to the Philippines under the USTR’s revised fiscal year (FY) 2017 TRQ for raw cane sugar. The remaining 14,932 MT came from the unused volume of other sugar quota holders.
“This quantity is in addition to the minimum amount to which the US is committed under the World Trade Organization Uruguay Round Agreements,” the USTR said, adding that the allocations were based on the countries’ historical shipments to the US.
Manila got the highest reallocation volume from Washington among sugar-exporting countries.
“The US Department of Agriculture also announced that all sugar entering the US under the FY 2017 raw sugar TRQ will be permitted to enter US Customs territory through October 31, a month later than the usual last entry date,” the USTR said.
The Sugar Regulatory Administration (SRA) said the Philippines is capable of filling the additional quota.
“The Philippines has enough sugar. [The] issue will be on price, because world prices are falling,” SRA Administrator Anna Rosario V. Paner told the BusinessMirror. “[This] will dampen the appetite [of exporters].”
Sugar industry stakeholders welcomed the additional quota, saying this would help reduce the country’s high sugar inventory level and stabilize sugar prices.
“Filling up the quota will reduce greatly our sugar inventory, relieve sugar mill warehouses of congestion and give us a fresh start in the new crop year,” Philippine Sugar Millers Association (PSMA) President Francisco D. Varua told the BusinessMirror.
“Definitely, PSMA can find a way to fill up the additional quota,” Varua said, adding that the additional shipments could arrive in the US by September.
Given this development, Varua said they expect the mill-site price of sugar in the next crop year to stabilize and settle at P1,500 per 50-kilogram bag (Lkg) to P1,600/Lkg.
“We hope [the price] would increase even a little bit. We do not expect it to go up significantly, but we’re thinking [it would] stabilize at about P1,500 to P1,600 per bag,” he said. “That should be a good price already.”
Varua added that the price of sugar in the global market has started to recover and had even increased by almost 15 cents.
He said he was “surprised” to learn that the Philippines received the highest reallocation volume and not Brazil. However, Varua added that this may be due to a shift in Brazil’s sugar policies.
“Brazil decided to reduce the tax on ethanol. So the production of Brazil that was supposed to be diverted for sugar exports is now for ethanol production,” he said.
Sugar Alliance of the Philippines Spokesman Emilio Yulo echoed Varua’s statement, adding that the price of “A” sugar destined for the US is more favorable than the “D” sugar, or those shipped to other countries.
“We gladly welcome the additional US quota. It will definitely help flush out the existing overhang, plus the fact that the price of ‘A’ sugar is higher than the ‘D’ sugar,” Yulo told the BusinessMirror.
Price monitoring by the SRA showed that, as of July 9, mill-site price of “A” sugar was at P1,198.13 per 50-kilogram bag. The figure was slightly higher than the July 2 price of P1,192.44 and was also 22.72 percent higher than the P976.33/Lkg recorded at the start of the current crop year.
The latest data from the SRA showed that, as of July 9, the Philippines has already shipped 136,188.73 MT commercial weight of sugar to the US. For FY 2017, the Philippines was earlier allocated 136, 201 MT.
Preliminary data from the SRA, a government-owned and -controlled corporation attached to the Department of Agriculture, showed that sugar production in crop year 2016-2017 has reached 2.495 million MT.
The figure is 11.48 percent higher than the 2.238 MMT produced in the previous crop year. It is also 10.88 percent higher than the SRA’s initial projection of 2.25 MMT.