THE sugar industry is facing another financial battering given reports that the country over-imported during the last three cropping seasons for the years 2024-2025. It is estimated that almost 1.5 million metric tons (MT) of refined sugar entered the country during the period. As a result, sugar inventory is more than double the normal buffer stock level.
Expectedly, excess inventory resulted in falling prices, both at the retail and mill levels. It is reported that raw sugar farm gate prices were around P3,000 per 50-kilo bag in early 2023. This dropped to P2,400 to P2,600 in the late 2024 and down further to P2,100 in early 2025.
Due to the massive inflows of imported refined sugar, local mills are unable to operate normally as there is little incentive to process sugar. The retail price of refined sugar is around P40 kilo in Thailand. It is lower when purchased at a wholesale basis which is priced at less than P35 per kilo.
Importing refined sugar in Thailand means paying a tariff rate of only 5 percent based on the Asean Trade in Goods Agreement. Assuming a price of P35 per kilo and adding a 5-percent duty, this means a total cost of P36.75. Plus logistics, it will sum up to around P40-P45 per kilo freight-on-board. There is no way our local refined sugar can compete.
The disconcerting angle here is why imported Thai refined sugar ends up in our retail outlets (wet markets, groceries, convenience stores and supermarkets) priced at no less than P80 per kilo. Obviously, there are greedy firms, entrepreneurs and even policy makers gaining windfall profits from this transaction. How does this happen?
The decision on whether to import sugar or not is arrived at after a sugar supply and demand analysis. The Sugar Regulatory Administration (SRA) is supposed to conduct the research work, but in the absence of any top-notch economists who can conduct rigorous economic and financial supply and demand analysis, one can just imagine the result. The SRA is also subject to a lot of pressures from politicians, including big sugar producers, millers, traders and organized sugar workers.
It is therefore not surprising that SRA supply and demand analysis normally provides a higher sugar sufficiency level (meaning local supply meets the bulk of demand) unlike when the estimate is conducted by economists at the Department of Economy, Planning and Development (previously the National Economic and Development Authority). Sugar supply shortfalls are usually higher in the DEPDev’s computation compared to that of the SRA.
On the basis of the supply shortage calculated by the SRA, it will recommend and seek the approval of its board to import the volume of sugar needed to fill-up the supply gap. Once approved, a certificate of necessity to import specifying the volume to be imported and the arrival period will be issued.
The situation gets murky during the awarding of the rights to import (quota allocations) to traders. Being awarded an import quota is similar to winning a lotto jackpot price since windfall gains can be enjoyed as the import price is practically just half of the retail price in the country.
This happened in 2023 when only three traders, declared by DA then as the “best and most competent,” were awarded quotas for 400,000 MT. Despite the alleged anomalous transaction, the silence by key policy makers and politicians involved in the sugar industry made many wonder whether they partook of the windfall profits.
The obvious solution is to auction the import allocations. The process will become more transparent and enable the government to capture part of the windfall profit, or will have the effect of reducing retail prices for consumers as the profit margin of importer-traders is significantly lessened.
Besides the massive inflows of imported refined sugar, the local sugar industry is also facing a threat from increasing demand for artificial sweeteners. So real is this that a manifesto was recently issued by local sugar stakeholders asking the government to limit the entry of the sugar substitutes. Data shows that the use of sugar alternatives have been increasing, with projections indicating that they might substitute for half of imported refined sugar in the near future.
There are two reasons why artificial sweeteners or sugar substitutes have become more popular, particularly among food processors. First is that they are priced lower than refined sugar, and second is that health-conscious buffs prefer to the alternative sweeteners.
The problem of our local sugar industry is structural in nature. Resorting to import bans or quotas either for refined sugar or artificial sweeteners will only provide a temporary relief. Such is practically going against the market.
Eventually, market forces will assert themselves at a greater magnitude, leaving the industry so much worse than it is today. The long history of the sugar industry is a clear manifestation of this reality as its stakeholders in the past either attempted or ignored market forces only to find the industry increasingly stagnating and underdeveloped.
The gradual demise of our sugar industry, once the mighty engine of capitalist development in the country, is poignantly chronicled in the work of Alfred McCoy titled “A Queen Dies Slowly: The Rise and Decline of Iloilo City.” The industry is now a ghost of its past and if drastic actions to arrest its further decline are not taken, I am afraid that it will become a mere footnote in the evolution of the Philippine agricultural economy.
What is working for the industry is that there is a proliferation of studies and recommendations on what to do. Among these are the further consolidation of sugar lands for proper production scheduling and management, abandonment of the current sharing arrangement between millers and the planters that disincentivizes the former to become more efficient, abandonment of the quedan allocation system to encourage greater efficiency and discourage rent-seeking activities, greater adoption of modern farm technologies and machinery, and greater investments in research and development.
The missing element is for the government to find the political resolve to push for these necessary reforms and for sugar stakeholders to willingly absorb the adjustment pain so as to chart a better future for the industry.
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