Stopping the freefall of raw sugar prices

It is a nice and wise move for the Sugar Regulatory Administration to repeat the voluntary purchase program (VPP) for raw sugar– or siphoning off a substantial volume of the sweetener from the local market–to prevent the freefall of raw sugar prices prior to the peak milling season.

First adopted in the crop years  2023-2024, the SRA was able to keep from circulation around 260,000 metric tons of raw sugar, and for this year, it expects to hold on as reserve some 500,000 MT of raw sugar to prevent the slide of the cane at the farmgate level.

In Sugar Order No. 2 for Crop year 2024-2025, the SRA said it is necessary to adopt this second round of voluntary purchase program to “maintain an optimum supply of sugar available for domestic consumption while ensuring reasonable and stable prices.”

The VPP for raw sugar would be done on a first-come, first-served basis and affords the legitimate local traders priority in importing sugar (if need be) at a ratio of 1: 2 (two units of imported sugar for every 1 unit of local raw sugar under VPP). 

The SRA said it would consider all data on sugar and in anticipation of the peak sugar production from March to May.

All raw sugar bought under VPP would be classified as “C” or reserve sugar for a period of 90 days although the shelf life of raw sugar is two years for optimal quality.

SRA Administrator Pablo Luis Azcona had floated the idea of repeating VPP to arrest the slide in millgate prices of the commodity.

The SRA’s mandate includes: a) supporting local farmers; b) ensuring stable farmgate prices; c) lowering retail prices and d) maintaining a balanced relationship between sugar production and demand. It also encourages planters associations to sell directly to local groceries.

“We’re studying what we did last year and finding ways to improve it. [We want to] make sure that anybody can participate in the program as long as they have a domestic trading license,” he told reporters.

Azcona said the program would “make the playing field a lot more level and fair.”

Farmgate price of raw sugar stood at P2,816 per 50-kilo bag as of January 19, higher than the P2,685 recorded price in the previous week, based on SRA data.

The prevailing raw sugar prices in Metro Manila markets ranged from P70 to P80 per kilo in January, SRA data showed

In the first VPP, eligible traders reportedly bought sugar at a price between P2,700 and P2,800 per 50-kilogram bag, compared to the prevailing market price back then of around P2,500 per bag.

Farmgate prices of raw sugar also immediately returned to above P2,700 per 50-kilogram bag level following the implementation of the program in the previous crop year.

Azcona explained that multiple sugarcane planters federations have written to the agency to ask the government to intervene and address the falling farmgate prices of raw sugar.

He said DA Secretary Francisco Tiu Laurel Jr. worried about declining prices when there is no glut in local supply.

He said the combined raw and refined sugar stocks are about 450,000 MT, which was around the same level as the 406,000 MT recorded two years ago. However, farmgate prices were falling from P3,000 per 50 kg bag of raw sugar two years ago to P2,400 per 50 kg bag, or even lower than its average last year of P2,600 per 50kg bag, when the country’s supply was at 750,000 MT.

“The current pricing is at breakeven or even lower than the cost-to-produce of small-scale farmers,” he said.

That to me is forward-thinking and proactive, unlike most DA officials who merely react to pressing market conditions.