The future of the Philippine sugarcane industry is very upbeat with an annual increase of sugar consumption worldwide and growing markets in neighboring Asian and developing countries, Dr. Peter Baron, executive director of the International Sugar Organization, said Saturday night.
But Baron, whose London based ISO that has 86-member countries, making it the biggest commodity organization in the world, stressed the need for the Philippine sugar industry to also pursue diversification into the production of ethanol, electricity from its bagasse, and biochemicals to ensure its competitiveness in the future.
Baron, whose ISO does market analysis for its members to indicate what to expect, told the DAILY STAR that while there is a current 4 million tons of sugar surplus in the world market, it is not bad because over the last two years there have been deficits, and the stocks of sugar producing and consuming countries are rather low.
“We expect that in the next year when we have this surplus a lot of countries will use the opportunity to restock,” he said, citing China.
We see that in the next 12 to 18 months sugar prices will remain stable at 23 to 28 cents per pound, which is a good price, he said.
Sugar consumption increases by 3.5 million tons a year worldwide, with the world currently consuming 170 million tons, he said. That means by 2020 an additional more than 30 million tons of sugar will be needed, he also said.
Asia is a deficit market for sugar so the Philippines has a lot of markets in its neighborhood for it to pursue, on top of its domestic and traditional US quota markets, Baron said.
You have to build markets outside of the United States as well, he stressed.
He also noted that sugar consumption is increasing in developing countries because of higher incomes.
On Friday, Agriculture Secretary Proceso Alcala said with a bumper sugarcane harvest, the Philippines is poised to export at least 300,000 metric tons of raw and refined sugar this crop year.
With a substantial harvest of 2.39 million MT for CY 2010-11, 21.3 percent more than last year, the country is on the way to regaining its previous distinction as a net sugar exporter, Alcala added.
But while the Philippines has very bright prospects for sugar, nowadays you have to look beyond that, Baron said.
Sugar should not only be the main pillar of the Philippine sugarcane industry, it has to diversify into ethanol, electricity, food additives, and in the future biochemicals such as resins, medicine, and bioplastics that have a very big market, Baron stressed.
“It is up to us in the sugar industry worldwide to become major players in modern diversification and that opens many new markets,” he said.
But the government must support the Philippine sugarcane industry in its diversification efforts, he said.
“There must be clear indications from the government about its ethanol policy and what producers can expect. It is a very risky business if you don't have the backing of the government,” he said.
“A clearly defined long-term policy is the basis for a successful ethanol industry,” he stressed.
He also said the Philippines will have to address the need to bring down its production cost of sugar. The cost of sugar production in the Philippines is high because farm lands are too small for the economies of scale, he added.
Baron said land reform has cut up efficient plantations into smaller 2 hectare farms, which has a downside because small areas cannot be efficiently farmed for sugarcane.
The Philippines needs to find a solution to enable block farming wherein a number of farmers work at running their farms together to address the economies of scale, he said.
To be able to bring down the cost of sugarcane production at least 100 hectares must be collectively ran together, he said.
Baron, who was the guest Saturday night at a dinner hosted by National Federation of Sugarcane Planters president Enrique Rojas at his residence in Bacolod City, was joined by Gov. Alfredo Marañon Jr., Sugar Regulatory Administrator Gina Bautista Martin, former SRA head Bernard Trebol and other sugar leaders.
Baron also visited his friend, James Ledesma, former SRA administrator and ISO council chairman, who is ill and who, he said, he holds in very high esteem.
The ISO official said it was his first visit to Negros Occidental, the heart of the Philippine sugar industry.*CPG