Required Report - public distribution

**Date:** 10/3/2005

**GAIN Report Number:** RP5037

RP5037

**Philippines**

**Sugar**

**Sugar Semi-Annual**

**2005**

**Approved by:**

![](media/image1.wmf)David C. Miller

FAS Manila

**Prepared by:**

Pia Abuel-Ang

**Report Highlights:**

The Philippine Sugar Regulatory Administration announced that total raw
sugar production in MY 2004/05 only reached 2.15 MMT, lower than the
2.18-2.20 MMT earlier projected, primarily due to the reduced raw sugar
output due to labor problems that beset certain sugar mill districts.
Domestic production in MY 2005/06 is forecast at 2.10 MMT, lower than
the output achieved last year.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Semi-Annual Report

Manila \[RP1\]

\[RP\]

The Philippine Sugar Regulatory Administration (SRA) announced that
total raw sugar production in MY 2004/05 only reached 2.15 MMT, lower
than the 2.18-2.20 MMT earlier projected primarily due to the reduced
raw sugar output in several key sugar milling areas. Sugar cane
production in MY 2004/05 also declined to 22.6 MMT. The drop in raw
sugar output was mainly due to labor problems that beset certain sugar
mill districts. Due to the joint efforts by industry stakeholders to
manage supply, domestic production in MY 2005/06 is forecast at 2.10
MMT, even lower than the output achieved last year.

  --------------------- ----------------- ---------- ---------- ---------- ---------- ----------
  **PSD Table**                                                                       

  **Country**           **Philippines**                                               

  **Commodity**         **Sugar,                                           (1000 MT)  
                        Centrifugal**                                                 

                        Revised           2004       Estimate   2005       Forecast   2006

                        Old               New        Old        New        Old        New

  **Market Year Begin**                   09/2003               09/2004               09/2005

  Beginning Stocks      277               277        405        405        287        239

  Beet Sugar Production 0                 0          0          0          0          0

  Cane Sugar Production 2340              2340       2180       2150       2100       2100

  TOTAL Sugar           2340              2340       2180       2150       2100       2100
  Production                                                                          

  Raw Imports           0                 0          0          0          0          0

  Refined Imp.(Raw Val) 0                 0          0          0          0          0

  TOTAL Imports         0                 0          0          0          0          0

  **TOTAL SUPPLY**      **2617**          **2617**   **2585**   **2555**   **2387**   **2339**

  Raw Exports           202               202        288        306        142        156

  Refined Exp.(Raw Val) 0                 0          0          0          0          0

  TOTAL EXPORTS         202               202        288        306        142        156

  Human Dom.            2010              2010       2010       2010       2010       2010
  Consumption                                                                         

  Other Disappearance   0                 0          0          0          0          0

  Total Disappearance   2010              2010       2010       2010       2010       2010

  Ending Stocks         405               405        287        239        235        173

  **TOTAL               **2617**          **2617**   **2585**   **2555**   **2387**   **2339**
  DISTRIBUTION**                                                                      
  --------------------- ----------------- ---------- ---------- ---------- ---------- ----------

+----------------+---------+---------+----------+-----+-------+-----+
| **PSD Table**  |         |         |          |     |       |     |
+----------------+---------+---------+----------+-----+-------+-----+
| **Country**    | *       |         |          |     |       |     |
|                | *Philip |         |          |     |       |     |
|                | pines** |         |          |     |       |     |
+----------------+---------+---------+----------+-----+-------+-----+
| **Commodity**  | **Sugar |         |          |     | (1000 |     |
|                | Cane    |         |          |     | HA)   |     |
|                | for     |         |          |     |       |     |
|                | Centri  |         |          |     | (1000 |     |
|                | fugal** |         |          |     | MT)   |     |
+----------------+---------+---------+----------+-----+-------+-----+
|                | Revised | 2004    | Estimate | 2   | For   | 2   |
|                |         |         |          | 005 | ecast | 006 |
+----------------+---------+---------+----------+-----+-------+-----+
|                | Old     | New     | Old      | New | Old   | New |
+----------------+---------+---------+----------+-----+-------+-----+
| **Market Year  |         | 09/2003 |          | 0   |       | 0   |
| Begin**        |         |         |          | 9/2 |       | 9/2 |
|                |         |         |          | 004 |       | 005 |
+----------------+---------+---------+----------+-----+-------+-----+
| Area Planted   | 395     | 395     | 380      | 380 | 370   | 370 |
+----------------+---------+---------+----------+-----+-------+-----+
| Area Harvested | 390     | 390     | 375      | 375 | 365   | 365 |
+----------------+---------+---------+----------+-----+-------+-----+
| Production     | 26100   | 26100   | 25000    | 22  | 24000 | 22  |
|                |         |         |          | 600 |       | 000 |
+----------------+---------+---------+----------+-----+-------+-----+
| **TOTAL        | **      | **      | *        | **2 | **24  | **2 |
| SUPPLY**       | 26100** | 26100** | *25000** | 260 | 000** | 200 |
|                |         |         |          | 0** |       | 0** |
+----------------+---------+---------+----------+-----+-------+-----+
| Utilization    | 26100   | 26100   | 25000    | 22  | 24000 | 22  |
| for Sugar      |         |         |          | 600 |       | 000 |
+----------------+---------+---------+----------+-----+-------+-----+
| Utilizatn for  | 0       | 0       | 0        | 0   | 0     | 0   |
| Alcohol        |         |         |          |     |       |     |
+----------------+---------+---------+----------+-----+-------+-----+
| **TOTAL        | **      | **      | *        | **2 | **24  | **2 |
| UTILIZATION**  | 26100** | 26100** | *25000** | 260 | 000** | 200 |
|                |         |         |          | 0** |       | 0** |
+----------------+---------+---------+----------+-----+-------+-----+

According to SRA, the increase in sugar prices observed in the last half
of MY 2004/05 was due to adjustments in the domestic market. In the last
two years, domestic sugar prices have been relatively low due to
oversupply, and as a result, the sugar industry embarked on an export
program to remove excess inventory. In MY 2004/05, about 164,000 MT was
exported to Japan, Indonesia and South Korea, over and above the 142,000
MT exported to the United States under the country specific
tariff-rate-quota allocation for the Philippines.

Moreover, according to SRA, the adjustment in market prices was
necessary to keep the whole industry viable, particularly the sugarcane
farmers who have to carry the burden of significant increase in the cost
of inputs, specifically UREA fertilizer. UREA, which cost only
P600/50-kg bag (\$10.71/bag) last year, is said to be close to P900/bag
(\$16.07/bag) currently.

  ------------- ------------- ------------ ------------- ---------- ------------ -------------
  **AVERAGE                                                                      
  PRICES OF                                                                      
  SUGAR** **IN                                                                   
  THE                                                                            
  PHILIPPINES                                                                    
  (Metro                                                                         
  Manila)**                                                                      

  **CROP**      **WHOLESALE                              **RETAIL                
                PRICE**                                  PRICE**                 

  **YEAR**      (Pesos Per 50                            (Pesos Per              
                Kg Bag)                                  Kg)                     

                                                                                 

                **Raw**       **Washed**   **Refined**   **Raw**    **Washed**   **Refined**

                                                                                 

  2002-2003     929.13        1,102.17     1,202.09      23.05      25.83        27.35

  2003-2004     839.87        1,068.57     1,171.63      22.75      25.59        27.12

                                                                                 

  2004-2005:                                                                     
  (As of August                                                                  
  31, 2005)                                                                      

   September    832.00        1,055.00     1,153.65      22.44      25.37        26.84

   October      846.49        1,055.00     1,156.47      22.43      25.37        26.82

   November     814.79        1,028.75     1,168.92      22.49      25.42        26.90

   December     802.00        940.00       1,182.33      22.66      25.56        27.12

   January      810.43        975.42       1,197.93      22.24      25.04        26.95

   February     856.00        962.19       1,228.03      22.37      25.28        26.88

   March        894.58        979.97       1,296.19      22.55      25.21        27.16

   April        913.72        985.73       1,314.47      23.05      25.41        29.19

   May          967.57        1,046.67     1,324.26      23.48      25.56        29.34

   June         996.67        1,089.96     1,355.42      23.19      25.37        29.24

   July         1,030.42      1,126.88     1,387.62      23.89      25.77        30.19

   August       1,000.86      1,083.75     1,343.57      23.94      25.66        29.33
  ------------- ------------- ------------ ------------- ---------- ------------ -------------

Source: Sugar Regulatory Administration

On August 30, 2005, President Gloria Macapagal Arroyo certified as
urgent a bill mandating the use of bioethanol as an alternative
transport fuel. The bill is now up for approval in its second reading in
the House of Representatives. Under the bill, the Department of Energy
(DOE) is directed to adopt a national bioethanol fuel program that will
essentially blend bioethanol with gasoline. The minimum blend will be 5
percent within the first two years of the measure's effectivity and
shall be increased to 10 percent by the end of the fourth year. The bill
also provides fiscal incentives to encourage investors to engage in
bioethanol fuel production.

In August 2005, President Gloria Macapagal Arroyo also issued Executive
Order No. 449, which reduced the tariff on bioethanol fuel to 1 percent
from 10 percent, when imported with certification by DOE. Ethanol is
currently being shipped to the Philippines from Brazil. The country has
imported a total of 2.5 million liters for the introductory run of
ethanol-blended gasoline and is looking at importing an additional 10
million liters before year-end. According to media reports, a liter of
ethanol-blended gasoline is cheaper by P0.65 compared to gasoline with a
95 research octane number (RON) and P0.71 cheaper compared to gasoline
with a 97-RON.