THE country’s domestic sugar prices are to stay above global levels next year as consumption continues to rise while production growth is likely to slowdown, Fitch Solutions Macro Research said Friday.
In its industry trend analysis, Fitch Solutions said, “Philippine sugar prices will remain uncompetitive by global standards.”
The think tank noted Philippine prices were trading at around P1,500 per 50-kilogram (kg) bag, “whereas our forecast for world 2020 sugar prices translates to around P760/50kg bag.”
“The rise in global sugar prices is therefore not going to make the Philippines any more or less price-competitive,” it said.
Putting pressure on prices is the expected slowdown in sugar production.
“We have revised down our 2019/2020 Philippine sugar production forecast to 2.1 million tons from 2.2 million tons previously, expecting output to remain flat year-on-year,” Fitch Solutions said.
“We have also moderately revised down our long-term production growth rate forecasts,” it said.
The gradual decrease in sugar areas due to prolonged labor shortages and rising competition from cheaper imported sugar will weigh on the industry in the longer term, according to Fitch Solutions.
In 2015, the Philippines cut tariffs to five percent from 38 percent in 2010 as part of its commitment to the Association of Southeast Asian Nations Trade in Goods Agreement.
The reduction in tariffs has caused sugar imports to rise tenfold, the think tank said.
The rise in consumption is also seen to put pressure on sugar prices.
“We forecast consumption to continue to rise steadily over the coming years…The local food processing and beverage sectors have been increasingly switching from high-fructose corn syrup to sugar owing to a recently-imposed tax on drink sweeteners being lower for sugar than for sugar-alternatives,” Fitch Solutions said.
According to the country’s Sugar Regulatory Administration, around 95 percent of total production is consumed by domestic industries, particularly the beverage manufacturers. (GMA News)