Are sugar prices high?

Allow me to clarify the current high prices of sugar.

Raw or brown sugar now costs P70 per kg or more while refined or white sugar is at P90 to P100 per kg.

As this happened, sugarcane planters have already sold their harvests (around April to May) for P34 to P40 per kg for raw or brown sugar and P55 to P60 per kg for refined or white sugar. They apparently did not benefit from the sugar price spike.

Why was there a sudden increase in prices? This had been attributed to tight supply. Our demand for 2022 was estimated at 2.3 million metric tons and production was only about 1.8 million MT.

There was a decrease of more than 100,000 metric tons in production due to Typhoon Odette that struck just as harvesting of sugarcane started, hitting a huge swath of sugar land.

There was a move to import sugar as early as last February but two court orders from separate courts in Negros Occidental stopped it. The main reason was sugar prices are likely to fall as it was still harvest season.

When the temporary restraining orders (TRO) from the Negros courts lapsed, Sugar Order No.3 was issued by the Sugar Regulatory Administration (SRA) to import 200,000 tons sugar for industrial users only.

The term of the SRA administrator, appointed by ex-President Rodrigo Duterte, lapsed on July 1, 2022 as it was co-terminus with that of the president. The officer-in-charge had no authority to issue a Sugar Order.

What compounded the tight supply was the pronouncement by the SRA administrator that supply of brown sugar would last only until August and white sugar until July.

Some sugarcane planters claimed that there was a huge volume of sugar stored in many warehouses of sugar traders, who had not been identified.

The spokesperson of the Department of Agriculture (DA), who is currently headed by President Ferdinand “Bongbong” Marcos Jr., claimed that prices would fall at the start of sugarcane harvesting in September.

Two sugar mills in Negros had opted to start milling middle of August.

Now, let us go back to the questions are sugar prices high? Should sugar prices fall to previous levels and what are the effects.

Consider these:

• Sugarcane for harvest from September 2022 to April 2023 had been planted in September 2021 to April 2022.
• Cane production, milling and transport or marketing had nearly doubled.
• The decline in peso value and higher interest rates had not been factored in the costing and would further increase production costs.
• Oil prices increased.
• Prices of fertilizer and herbicides had more than doubled.
• Costs of land preparation, cane points, cane planting, cultivation, weed control, harvest and transport had all increased.

Our calculations showed that it costs some P2,600 to P2,900 to grow and mill a ton of cane, which translates to about P2,330 per 50 kg of raw sugar.

The earlier expectation that the price of sugar will go down to its previous level once milling starts this September to October may not or should not happen.

It should not happen because of what it would trigger.

Results of our calculations:

• At selling price of P1,700 per 50 kg of raw sugar, planters would lose P630 per 50 kg as production costs P2,330 per 50 kg.
• Farmers may not harvest.
• What’s the merit of harvesting if it means losing money, as one planter said.

Continuing our calculations , the mill gate price of brown sugar should be no less than P2,665 per 50 kg for planters to earn. This would translate to retail price of P65 per kg. White sugar mill gate price would be P3,950 per 50 kg or P90 to P95 per kg in retail.

But are prices really high?

To answer this difficult question, we calculated the inflation-adjusted price of sugar using the consumer price index (CPI). The CPI-adjusted price of raw sugar is P141 per kg. At P65 per kg, the price of sugar is 54 percent lower than its CPI-adjusted price.

Calculations were cited to inform the consuming public that sugarcane planters are also unhappy about the price spike.

High sugar price will negatively affect many small, medium enterprises, including big food industries. As their product prices increase, consumers will also reduce purchases and household sugar consumption will also decrease.

Should there be a price fall again, mostly affected would be the small farmers who own less than 5 hectares. They comprise about 75 percent of 62,000 planters. Also, the 5 to 6 million people directly or indirectly employed in the sugar industry would be affected.

If prices prior to oil and labor cost increases would prevail, many sugarcane planters, especially the small ones, will go broke.

High costs of production and ventures made high risk by climate change would characterize agriculture production.

But there are greater risks.

When planters don’t earn, they might abandon sugarcane production and shift to other enterprises to earn a living. Or they would sell lands and move to other interests completely.

Sugar is not a staple food.

As stated earlier, demand or consumption will decrease as prices increase.

For calculations, the per capita consumption of 20 kg will yield a total demand of 2.3 million tons. This per capita consumption may decrease to 18 kg (or even lower). Then, total demand will be 2.1 million tons.

Our sugar yield estimates for this crop year (2022-2023) ranged from 1.7 to 1.9 million tons. Let’s hope there will be no strong typhoon during harvest so we get the yield 1.9 million tons and import only 200,000 tons.

Consumers should help planters grow sweeter canes so we won’t need to import 200,000 tons of sugar which would negatively affect millions directly or indirectly employed in the sugar industry.

READ: Importing 200,000 tons of sugar: Making life bitter for 3M Filipinos

(EDITOR’S NOTE: The author, Teodoro C. Mendoza, PhD, is retired professor of the Institute of Crop Science, College of Agriculture and Food Sciences, UP Los Banos. He is a sugarcane agronomist by specialization, taught sugarcane agronomy for at least 42 years until he retired in 2019. He authored many studies and published papers on the varied aspects of sugarcane production.)