MANILA, Philippines — Prices of sugar in the Philippines will remain above global levels, a Fitch unit said, adding that slow production growth will likely persist in the face of steadily rising consumption.
In a research note, Fitch Solutions downwardly revised its sugar production forecast for the Philippines for this year and next to 2.1 million tonnes from 2.2 million tonnes previously.
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“While unfavourable weather in recent months will lower yields and overall production in the short term, gradually decreasing sugar area due to prolonged labour shortages and rising competition from cheaper imported sugar will weigh on the industry in the longer term,” the Fitch unit said.
“With regards to the latter, ongoing liberalisation to the domestic sugar sector has led to spike in imports in recent years,” it added.
Finance Secretary Carlos Dominguez III said in July that the government is taking a close look at sugar import liberalization because domestic prices are double the world market price, weighing on the competitiveness of the food processing industry. Fitch Solutions expects Philippine sugar prices to remain uncompetitive by global standards.
But the move was met with opposition, with the Senate urging the executive branch to drop its plan to open up the local sugar industry to importation as the move could be “disastrous” to small farmers and agrarian reform beneficiaries.
According to Fitch Solutions, the Philippines is still close to achieving sugar self-sufficiency, with almost all of domestic output being consumed locally. Government data shows around 95% of total production is consumed by domestic industries, in particular, industrial users such as beverage manufacturers.
“We forecast consumption to continue to rise steadily over the coming years as a result,” Fitch Solutions said.
“The local food processing and beverage sectors have been increasingly switching from high-fructose corn syrup (HFCS) to sugar owing to a recently-imposed tax on drink sweeteners being lower for sugar than for sugar-alternatives,” it added.