Sugar Road Map – 2

We took up yesterday the production targets and the attained level of quantity that our farms have produced based on statistics from the Sugar Regulatory Administration. Although I mentioned that there is a possibility that the Road Map was prepared in 2009 before the incumbent SRA Administrator Ma. Regina Martin came into office it is also possible that the production level that was appended in the Sugar Road Map was prepared when she assumed office and became the basis for the SRA production projections.

Be that as it may, the Road Map targets that our sugarcane that we will cultivate to be used for bio-ethanol will remain at 14,356,299 liters from 2010-2012.

The share to be allocated to ethanol is ambitious – to 97,313,500 in 2012-2013 and then increased by about 100 million liters in 2014 until in 2015-2016 total production reaches 304,487,125 liters

The intervention of the government is vital if the sugar industry is to attain the SRA expectations. In this area the sugar industry leaders should make their political influence felt especially with the coming national elections when national politicians are more attentive to the needs of the mass-based sectors.

Our experienced since the sugar-based ethanol was mandated in 2007 for use in motive fuel has been dismal. The government continues to allow importation of cheaper alcohol for the mandatory mix with fossil-based fuel in effect easing the market for our ethanol which unfortunately is more expensive than the imported ones. As with our sugar, so is the production cost of alcohol.

Remember the ethanol plants in the cities of San Carlos and La Carlota and I think another one in Mindanao? These were constructed in response to or in cooperation with the government’s program to begin the process of reducing our dependence on imported oil.

These plants had to either close down or drastically reduce production for lack of sugarcane which is the fodder or feed stocks for these plants.

When the price of sugar started to rise and went off the roof, the ethanol plants were left dry. This experience tells us that the government’s energy program has not considered insuring that canes for the plants are secured and different for the supply intended for human consumption.

Sugarcane planters, like other businessmen, seek the best returns for their canes and the ethanol plants were buying cheaper compared to the sugar mills. They had little choice. Competition for cane supply left the ethanol plants uncompetitive. On the other hand, the sugar mills, in order to survive had to offer a better price to planters plus more generous incentives.

While this strong competition can be seen as healthy for the planters, their longer term effect will work against the interest of the industry as already seen during the last three years. With prices of fossil fuel hitting the roof we have little ethanol to help ease the price of motor fuel.

Unfortunately, while this lack of canes gives the planters the edge, the reality in the market does not make the planters happy because the price of their sugar remains erratic with longer lowdown.

This situation indicates an absence of policy on how the two competing cane processing industries are assured of the best returns that will propel them to attain our target needs for blended fuel.

Worse, the users of fuel have not benefited from this mixture with ethanol as the pump prices skyrocket as if there is no ethanol at all.

The Sugar Road Map gives us a good estimate of the ethanol situation. The biofuel law was passed in 2007 and it mandated that a gradual mix of sugar-based ethanol should start in February 2009 and by 2011 this blend should reach 10% of ethanol. This blend required 460 million litters.

Government policy dampened our ethanol production due to continued importation without protection for our local producers. This stunted their growth to the extent that our three distilleries have now only 79 million liters of alcohol capacity. The SRA statistics speak eloquently on the state of ethanol as an alternative use of sugarcane.

This is a situation of the proverbial chicken and egg. The government allows importation of ethanol because we have only three distilleries with limited capacity, in effect forcing the oil companies to import to be able to fill the supply and comply with the law.

On the other hand importation of cheaper ethanol is a disincentive to expansion of our own supply. Somehow, somewhere this cycle must be broken. National interest especially of the uncontrolled spike in fuel prices, dictate that we must develop this alternative use of our sugarcane and improve the competitive edge of the industry and provide secured returns to our farmers.

What is the proposed solution of the SRA and the industry? Is the proposal attainable? I will continue on Monday.*

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