OVERVIEW OF THE SUGARCANE INDUSTRY

Updated on March 2016

I. PLANTATION AREAS

Total sugarcane area in crop year 2013-2014 was 423,333 hectares

planted in around 20 provinces within the 10 regions of the country.
However, in crop year 2014-2015, the plantation area for sugar
production declined to 416,893 hectares. Further, in crop year 2015-2016,
latest crop estimate of SRA shows another shrinkage in plantation area to
413,264 hectares.

Sugarcane growing areas cover 29 Mill Districts (MDs) – 7 MDs in Luzon

(includes Isabela Mill District, a newly created mill district dedicated to
bioethanol fuel production), 3 MDs in Mindanao, 4 MDs in Panay, 2 MDs
in Eastern / Central Visayas (Durano MD is merged with Bogo-Medellin
MD due to the closure of its sugar mill), 2 MDs in Negros Oriental and 11
MDs in Negros Occidental. SRA created the Mill District Development
Committees (MDDCs) in the mill districts to oversee and implement
programs and projects for the development of the sugarcane industry. It
is composed of representatives from the mills, planters’ associations,
Philippine Sugar Research Institute (PHILSURIN) and SRA as Secretariat.
The MDDCs were transformed into SEC-registered foundations or Mill
District Development Council Foundation, Inc. (MDDCFIs) in order to avail
of the Sugar ACEF grant in 2001.

Generally, within the five-crop-year period, sugarcane areas harvested

were up from 385,662 hectares in crop year 2009-2010 to 413,264
hectares in CY 2015-2016. Figure 1.2 shows the distribution of sugarcane
plantations by island in crop year 2013-2014. Negros island shares 55% of
the sugarcane production areas, followed by Mindanao with 21% share,
Luzon with 14% share, Panay with 7% share and Eastern/Central Visayas
with a share of 3%.

In terms of farm productivity within the five cropping seasons, from CY

2011-12 to CY 2015-16, crop year 2012-2013 exhibited the best yield of
59.78 TC/ha while the estimated yield in crop year 2015-16 of 55.07 TC/ha
is the lowest so far. The changing climatic conditions is the main reason
for farm yield variability such that in CY 2015-16, the plantations
nationwide suffered an extended El Niño which stressed the growth of
sugarcane, being an annual crop.

II. FARMERS AND WORKERS

In CY 2013-2014, a report from the SRA extension unit indicates that 81%
out of the 78,276 farm workers are small farmers, that is, they are
cultivating farms of 5 hectares and less.
 Report on the distribution of the social amelioration cash bonus
administered by the Department of Labor and Employment (DOLE)
showed that in CY 2012-2013 there were 686,968 farm workers and 13,965
mill workers who received cash bonuses while in CY 2013-2014, there were
only 600,992 farm workers and 12,974 mill workers who received cash
bonuses. These data indicated a reduction in farm workers which
supported the claim of the planters that there is a shortage of laborers in
the industry. The existence of migrant workers is another proof that there is
really a shortage of farm workers in the industry.

III. SUGARCANE PROCESSING

The sugarcane industry in the Philippines has grown into a multi-product

industry with sugar, bioethanol and power as its major products.
Muscovado, although the production areas ranged from 2,000-3,000
hectares only, is a competitive product considering that its price in the
domestic and international market is higher than raw and refined sugar.
Molasses is a by-product from sugar manufacture which became a major
raw material in bioethanol production.

A. Sugar Factories

In crop year 2015-2016, there are 27 operational sugar mills and 14

sugar refineries. Out of the 27 sugar mills, one is registered with SRA to
be producing muscovado sugar. The rest of the muscovado-
producing facilities are not registered with SRA.

In terms of sugar production, it was in CY 2012-13 that the industry

produced a record-high of 2.465 million metric tons of raw sugar
(reckoned from data starting crop year 1977-1978) and a low of 1.33
million metric tons in crop year 1986-1987. Production of sugar in CY
2015-2016 was affected by the prolonged El Niño which may bring
down production to a range of 2.15 – 2.20 million metric tons.

B. Bioethanol Facilities

The biofuels act of 2006 opened up the gates to new investments in

the sugarcane industry, through the bioethanol fuel production
facilities. In 2007, voluntary 5% bioethanol blend in gasoline was
implemented to jumpstart with the mandate and the bioethanol used
were all imported. San Carlos Bioenergy Inc. (SCBI) pioneered in the
bioethanol fuel business which started operation in 2009 with an initial
capacity of 30 million liters annually. The target sugarcane production
areas dedicated to supply the feedstock needs of SCBI is around 5,000
hectares. Although Leyte Agri Corporation operated in 2008, the
facility is an old one producing potable and industrial alcohol. Its
production capacity is only 9 million liters annually. Roxol Bioenergy
 Corp and Green Future Innovations followed, putting up new
investments in the bioethanol industry with annual production
capacities of 30 million liters and 54 million liters, respectively. Green
Future Innovations Inc. (GFII) is the second sugarcane-based
bioethanol investment in the country which utilizes around 5,000-8,000
hectares of sugarcane plantations in Isabela and nearby provinces to
supply its feedstock needs. GFII invested around Php11 billion for its
production facilities and plantation development.

A major setback of the bioethanol investments occurred in 2010 when

the prices of sugar went up and the implementing guidelines of the
bioethanol mandate is not yet in place. SCBI halted its operation,
Roxol deferred its operation while Green Future Innovations was still in
its construction phase.

Investments in the bioethanol sector was revitalized in late 2011 upon

the issuance of the Department of Energy the implementing guidelines
on the optimization of locally-produced bioethanol fuel and the 10%
bioethanol mandate. Oil companies are given local monthly
allocations out of the volume commitments of local producers and a
bioethanol reference price was put in place to serve as benchmark
during price negotiations between the petroleum companies and the
bioethanol producers.

In 2016, ten bioethanol fuel plants operate with a total production

capacity of 282 million liters annually. In 2014, around 115 million liters
of bioethanol fuel was produced by eight bioethanol distilleries which
represents approximately 30% of the mandated requirement. About
70% of the mandated requirement is still sourced from imported
materials while in 2015, total production increased to 168 million liters
which indicates a local supply of around 42% of the mandated
requirement. An improvement in local production is a signal of
investors’ confidence in the bioethanol program of the government.

C. Biomass Power Plants

Power generation from bagasse became the latest major value-

added product from sugarcane when the renewable energy law of
2008 was passed. The law provides incentives to bioenergy developers
and farmers as well in terms of duty-free and VAT-free importations,
income tax holiday for developers and a feed-in-tariff of Php6.63 per
kw-hr for biomass power. Power cogeneration is not new to the sugar
industry since all mills and refineries have been using bagasse to
generate its own power but conventional boilers and turbines are not
designed to produce excess power to be sold to the grid.

The biggest producer of biomass power so far is SONEDCO sugar mill

with a capacity of 46 MW. First Farmers Holdings Corporation was the
 first one to sell power to the grid and other mills who are selling to the
grid are Central Azucarera de San Antonio in Iloilo, and Crystal Sugar
in Bukidnon. The two distilleries, SCBI and GFII are also selling power to
the grid. The biomass power sector with a target of 250 MW was
behind in attaining its target and the targets under the renewable
energy program is being considered for revision.

IV. PROGRAMS FOR THE SUGARCANE INDUSTRY

For so many decades without government support on infrastructure

development and other major support programs, the sugarcane industry
development act (SIDA) of 2015 was passed (RA 10659) which provides
mandated programs and mandated appropriations for the sugarcane
industry. Block farming program is institutionalized and supported under
the SIDA; socialized credit is mandated to support crop financing, farm
mechanization and other farm support services; scholarship program to
generate the necessary expertise for the improvement of farm
productivity and efficiencies of production facilities is supported; R, D & E
activities are intensified and infrastructure development is also funded
under the law. Other agencies of government are also mandated by the
law to support the programs for the sugarcane industry. The law was
passed through the initiatives of Congressman Alfredo Benitez and
Senator Cynthia Villar.