No relief seen from high sugar prices

MANILA, Philippines — Sugar prices are expected to remain elevated amid strong demand, while production growth is seen slowing further, Fitch Solutions said.

“We have revised down our sugar production forecasts for the Philippines for 2019-2020 and beyond, expecting production growth to slow. Meanwhile, consumption continues to rise steadily, supported by industrial users amid higher taxes on substitute good high-fructose corn syrup,” it said.

The research arm of the Fitch Group lowered its sugar production forecast to 2.1 million tons from 2.2 million tons as it expects output to remain flat year on year.

It also moderately revised down its long-term production growth rate forecasts as unfavorable weather in recent months would lower yields and overall production in the short term gradually decreasing sugar area due to prolonged labor shortages.

Rising competition from cheaper imported sugar would also weigh on the industry over the long term.

“Ongoing liberalization to the domestic sugar sector has led to spike in imports in recent years. Since the Philippines cut tariffs in 2015 to five percent from 38 percent in 2010 as part of its commitment to the ASEAN Trade in Goods Agreement, sugar imports have risen tenfold,” Fitch Solutions said.

Meanwhile, major sugar exporters such as Thailand, which benefit from economies of scale, generous government support, and lower production costs, have ramped up sugar exports to the Philippines.

“Exports will be supported by favorable domestic and US sugar trade policy. But Philippine domestic sugar prices will remain well-above global levels. Despite our forecast for global sugar prices to average slightly higher in 2020 at 13.5 per pound, Philippine prices are almost twice as high,” it said.

Philippine sugar prices were trading at around P1,500 per 50 kilogram bag, whereas our forecast for world 2020 sugar prices translates to around P760 per 50kg bag.

“The rise in global sugar prices is therefore not going to make the Philippines any more or less price-competitive. With sugar imports from Thailand rising, however, it is likely that cheaper imports will cap domestic prices to an extent,” it said.