The National Federation of Sugarcane Planters and the Confederation of Sugar Producers Association are calling on the Sugar Regulatory Administration to immediately allocate a portion of the country’s current sugar supply as “C”, or reserve, because of an upsurge in production and a drop in millgate prices to below P1,300 per Lkg.
Rafael Coscolluela, CONFED national president, said the allocation of “C” sugar is needed because of “a worrisome drop in sugar prices over the past several weeks, as well as the possibility of a further drop starting January 2013 due to the reduction in tariff on imported sugar to 18 percent and high inventory levels from January to May 2013, which are the peak milling months.”
SRA Administrator Ma. Regina Bautista Martin said that, as soon as she gets an estimate on production for this crop year, she will decide on whether or not to revise current sugar allocations.
“I am carefully studying their proposals to truly achieve the objective of keeping a volume of sugar from going to the market without depriving the small planters from getting their share of harvest when they need it,” Martin also said.
NFSP president Enrique Rojas said they recommend that a portion of sugar production should immediately be allocated as reserve sugar, which should be gradually converted to “B” when production declines.
The allocation for “C” will ensure a balance between sugar demand and supply that will be beneficial to both the consumers and the producers, Rojas told Martin.
Sugar Order No. 1, Series of 2012-2013 issued on August 30, 2012 set the allocation of sugar production at: “A” or US Quota Sugar - 10 percent, “B” or Domestic Sugar – 82 percent, and, “D” or World Market Sugar – 8 percent, Rojas said.
When such allocation was made, the assumption was that market demand would absorb sugar production in the early months of the milling season, he added.
However, Rojas said, “We have noticed that there has been an upsurge in sugar production. We produce upwards of 200,000 metric tons in one month but monthly withdrawals remain at an average of 180,000 metric tons.”
“Our production at this point is already too much for the market to absorb,” he also told Martin.
“We also have to consider that, in the Visayas, two sugar mills – Kananga Sugar Mill in Leyte and Bogo-Medellin Sugar Mill in Cebu – have not yet started operations. In Mindanao, Davao Sugar Central and Cotabato Sugar Central have yet to start milling while, in Luzon, most of the mills there have not yet started operation,” he added.
Rojas said that when all mills in the country go full swing in their production in the coming weeks, further surge in production can be expected. The market will be flooded with too much sugar which the demand cannot absorb, he added.
Coscolluela said that in order to reduce the prospects of a further softening of sugar prices as milling progresses, their members unanimously resolved to recommend to the Sugar Regulatory Administration to classify 20 percent of our total national production as “C” or reserve sugar.
The “C” sugar should be block quedanned - to preclude predatory buying from producers in need of cash and to facilitate the provision of quedan financing, and converted to “B” when SRA deems it appropriate as market conditions, he said.
This allocation of “C” will bring about a more balanced supply situation throughout the rest of the current crop year, and hopefully help prop up sugar prices at a level that is reasonably profitable to sugar producers and fair to consumers, he added.
Coscolluela said they are proposing the following sugar allocations, possibly beginning 1st weekending of December 2012: “A” - 10 percent, “B” - 62 percent, “C” - 20 percent and “D” - 8 percent.
Meanwhile, Bautista said she is requesting the planters’ associations to assure the small planters of financing their C quedans should a portion of the production be allocated as reserve.
“Small planters will need cash for their quedans. So associations will need to prepare for financing,” she said.
“C quedans are reserved so they can't be sold. For small planters they can't hold as long as the big planters. Quedan financing should be made available for small planters,” she added.*CPG