The Philippine sugarcane & milling industry

According to the Institute for Development and Econometric Analysis, Inc. (IDEA) latest Industry Trends, a regular publication produced by IDEA, the Philippines was once considered a major player in the global market for milled sugar. Based on data from the United Nations Food and Agriculture Organization (UNFAO), the country’s annual sugar production during the mid– and late–1970s was among the top five in the world; indeed, the country’s highest annual sugar production was recorded in 1976, when it hit 38.71 million metric tons (MT)—the fourth largest among the world’s major sugar producers at the time.

By the mid–1980s, however, the industry suffered what arguably was its worst setback; during the 1984–1985 milling season, gross milled cane figures contracted by a third to 22.84 million from the previous year, the largest year?on?year decline the industry experienced.

Furthermore it was reported that, the industry’s best days proved to be short–lived as it saw annual production go down by more than a third to 22.84 million MT in 1985 from a year ago. The Gross Value Added of the sugarcane industry contracted by 22.3% in 2010, from 5,812 million Php to 4,515 million Php in 1985 prices, breaching its lowest level after more than 10 years. Sugarcane is a crop that is sensitive to weather conditions and climatic conditions have serious repercussions on milling and refining which usually accelerates during the first and the fourth quarter of the calendar year. The low level of production in 2010 can be explained by the El Niño phenomenon experienced by the country from the last quarter of 2009 until June 2010 and the La Niña which commenced in September 2010 after super typhoon Juan hit the country, and lasted January this year.

Per same published report, based on the data from the Bureau of Agricultural Statistics (BAS), the sugarcane production and milling industry is expected to pick up at the end of 2011 as more favourable weather conditions helped to increase production output. The first three quarters of 2011 saw the production output rise by 84.8% than its level for the first three quarters in 2010, hinting that the industry would stabilize back to its level prior to the weather disturbances of last year and of the year 2009. Note that sugar production had been declining for the past two years before it finally picked up in 2011. It showed a robust growth rate of 75.3 in the first half of 2011; it even continued to surge in third quarter with 208.4 percent. Unfavorable weather conditions during the last quarter of 2011, however, may impact the strong performance of the industry. There were 32 firms in the local sugar milling and refining industry listed in the 2009 edition of the Securities and Exchange Commission’s (SEC) Top 10,000 Corporations List. Included were integrated sugar millers and refiners, standalone millers and refiners, and sugar traders and distributors. Of these 32 companies, leading all sugar millers and refiners was Central Azucarera Don Pedro, Inc. (CADPI), which had revenues and profits of Php3.95 billion and Php152.05 million, respectively, according to IDEA.

(to be continued)

For comments, rejoinders and questions related to credit & collection, email at [email protected].