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THE PHILIPPINE SUGAR INDUSTRY: WHAT NEEDS TO DONE By: Teodoro C Mendoza, PhD Professor 12 ,Crop Science Cluster, College of Agriculture, U.P.Los Banos, Laguna: E mail ad:
[email protected],
[email protected]
Occasional Paper (2016). Institute of Crop Science, College of Agriculture, UP Los Banos, Laguna
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SUMMARY Facilitating the transformation of Philippine Sugar Industry to be more productive and globally competitive requires many entry points to be addressed as it is not a stand alone industry. First, the industry must reward the workers with decent wage and decent salaries for the S/T personnels to encourage them to stay and make a career across the industry’s value chain instead of leaving the country and work abroad as OFW. Current stocks of knowledge are available to make the sugar industry resource use efficient (land, labor, capital) and climate change adaptive (at the level of cane production). Moreover, the industry (processing or output side) can take off from existing technologies, harmonize them to earn additional revenue (Cogen, bioplastics). The low farm productivity (less than 60 TC/ha since the last 5 decades -1957 to date) can be increased by adopting proven good management practices in crop cultivation (adequate land preparation, timing of planting, balanced fertilizer application, planting of location adapted varieties or good agronomic practices). This needs capital infusion (low interest -credit to the farmers). Crop establishment start form land preparation. Helping the farmers buy a tractor (group farming project of SRA & DAR) is a prime logistic support. The yield increase will allow the farmers to repay the loan even a P5 million (60 ha module). It is best to have affordable interest rates at 6% per annum. The benefits of yield increase will be used to pay the loan (prime pat + interest) incurred in buying the tractor (120 Hp). Similarly, the low-efficient mills (below 2.0 LKg/TC) can be upgraded so their sugar recovery will increase above 2 Lkg/TC. Capital infusion from P300M to P1 Billion, depending on their original milling capacity, will enable them to repay back their loans provided sufficient canes are delivered to their mill yards. But why the sugarcane planters and millers incur high costs (to buy tractor and upgrade the mill). All of the machine components (hardware part of sugar production) are imported. The current planter: miller sharing system appeared to be better for the planter than the Cane Purchase system (CPS) being followed in Thailand. The planters earn more than the CPS provided the sugar recovery is greater than 1.8 Lkg/TC. Shifting to CCS need legislation. It will be divisive. CPS has its own pitfalls. The National Industrial Policy (NIP) is concluded to be necessary catalyst that will trnasfor the sugar industry .NIP, however, should address the short, medium and long term requirements of the industry in general, and sugar industry in particular. As follows are the specific policy recommendations 1) There is a need to revive the national steel industry. In support to the steel industry, is to revive upstream industries (i.e. ship building, vehicle/car manufacturing) that will serve as local market for the metal industry. Instead of selling raw mineral ores (the Philippines is just one out of the 4 countries that sell raw mineral ores), process them locally. In turn, this needs R/D on metallurgy, design engineering and allied sciences and technologies. Early in the 60’s and 70’s, the Philippines was manufacturing tools, equipment, and parts of sugar mills. It means local talents are still available though their age are graying. Professors in the various Colleges of Engineering in different private and state colleges and universities of the country are ready man power resource pool waiting to be tapped once a NIP is in place .The country need to invest in the hardware part of technology , and the human-ware side of S/T. There is a need to increase the S/T budget from 0.12% to 1% of our GNP as recommended by UNESCO. In a technology-based economic development, the Philippines has a lot of catching – up to do on the S/T side which is backbone of NIP. 2) Immediately, we have the local talents and skills to fabricate locally, our basic tools, equipment tractor attachments at the minimum, our own engine in the long term. Sugarcane planters , on their own initiative, have re-designed and locally fabricated a double row planter and multiple jobs per pass tractor implements. Philrice engineers had successfully designed and fabricated a rice combine (3 PhDs in engineering, 3 years job). A team of engineers can also be constituted to fabricate a locally adapted cane cutter and cane stalk loader (SRA & PHILSURIN leaders should facilitate).
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3) Industries are associated with pollution (air, water and land) and emission of greenhouse gases contributory to global warming/ climate. With or without the value chain analysis, the associated GHG emission or pollution must be addressed with production processing marketing. Specific policies to address the following concerns must be formulated and implemented: a.Stop cane burning. Cane burning contribute 37% of the total GHG, explains the low soil organic matter, increasing the fertilizer required per ton cane occurring at the time when prices are increasing due to oil price increase. Only 5% canes are burnt in Australia. Brazil had passed policy to stop burning canes. No burning/ crop residue cycling is a key practice under organic agriculture (RA 10068). b.Use renewable/green packaging materials. Bioplastic from sugarcane bagasse can be put into the market right away. Increasingly, cities and municipalities (LGUs) are prohibiting the use of plastics as packaging materials which harmed/displaced labor in the plastic industry. Win-win solutions to the sugar industry wanting to increase revenue and the plastic industry avoiding large scale lay-off of their workers and employees if biodegradable plastics are made available. c.To have more bagasse available, old and inefficient boilers must be replaced with boilers that consume only 1/3 bagasse to process same ton of cane stalk. Similarly, refining raw (brown/red) sugar into white sugar which had been found to be causing diabetic type 2 must be reduced considerably. This will save lots of bagasse for bioplastic. 4) More than 80% of the 62,000 sugarcane planters own small farm. Promote small farm development (SRA group farming initiative is in the right direction) adopting the IASTD (International Assessment Adopting Science and Technology Development) principle of small farms multifunctionality. 5)Sugarcane planters will grow sugarcane continuously if they perceived they earn more by planting sugarcane. COGEN shall ensure the economic viability of the 2-major products of sugarcane-based industry (food sugar and COGEN power). It is a big boost to the current 2 billion dollar (USD) earnings of the industry. Even if only half of the 27 sugar mills will install COGEN facilty ,at an average 116 milling days, the estimated gross revenue shall be about 154 billion pesos (3.5 billion USD). 6) Inclusive growth and small farm development is linked to cooperativism as experienced in Japan, Malaysia, Thailand, Egypt and Israel. Scale economics is necessary when machines for land preparation and hauling trunks are acquired by the farmers. 7) There is still a need to pursue global advocacy from “free trade to fair trade”. We should declare NO to direct and indirect subsidies for agricultural products. Or,these subsidies must be imputed to the price during trade. Accordingly, additional tariff should be implemented for incoming traded products. 8) A reasonable domestic price of sugar should be studied i.e. average price of Indonesia, Thailand ( or other developing countries producing sugar) to achieve fair price level and that can mitigate sugar smuggling. 9) Sugar consumption from a low of 19 kg/cap (or 22 kg/cap less OFW) must be increased by increasing consumption among the 30% active age whose caloric intake is 13% lower(or even lower ) than their recommended dietary intake (sugar is the cheapest source of caloric energy) by manufacturing sweet candies, increased used of sugar in food preparation, and in pre-mix drinks. Put up campaign against the use of alternative sweeteners (Aspartame, HFCS etc.).Target : Increased sugar consumption up to 30kg/cap (35kg/cap in Thailand) to consume 3.12 Mmt locally of the 3.66 million tons target yield by 2016. 10) Finally, the Philippines should participate in reassessing WTO-Agreements in Agriculture. The Philippines emit only 0.27% of the global GHG emissions, yet, it ranks 3rd of the vulnerable countries and perhaps number 1 now after Sendong (2011) and Pablo (2012). This will reduce the national average yield, increase the costs of production to recover lost crop yields. A Climate change- default price mechanism should be implemented instead of “business as usual” practice or as if nothing happened! The Philippines is geographically located in an Intertropical convergent zone (ITZC), being visited by 20-30 typhoons ; 3-4 of these are super strong/damaging typhoons
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Brief Background & Facts about the Philippine Sugar Industry Believed to be introduced by the Arab traders, sugarcane production was already widespread long before Ferdinand Magellan landed on Philippine soil in 1521. Sugar then was produced in a crude and primitive way using manually operated wooden slabs to extract the juice. But soon, these were replaced by cylindrical wooden rollers driven by carabaos or water buffaloes. The juice was boiled to concentrate it . There were two products produced . In Luzon, it was pilon sugar while it was panocha or muscovado sugar in the Visayas. The two products differed only in the final curing of the concentrated syrup. Panocha or muscovado sugar was concentrated syrup solidified in moulds using halved coconut shells or big bamboo baskets while for “pilon” the juice was boiled to higher degree of concentration where the resulting syrup was poured into reverted ball-shaped clay jar. As early as 1750’s sugar was already being exported by the Philippines. Among the first foreign markets were Spain, China, India and other Asian countries. Australia was also once an importer of Philippine sugar. In 1796, sugar trade with the United States began with an initial shipment of about 350 metric tons . The change from muscovado to centrigual sugar production was triggered by a strong market preference for centrifugal sugar in the export markets. It started in 1909 when the Pangasinan muscovado mill shifted to centrifugal sugar operation with the installation of a triple-effect evaporator, vacuum pans and centrifugal machines. It was followed by San Jose, Mindoro ,where a complete centrifugal sugar plant with a daily grinding capacity of 1000 MTCD was constructed in 1911.A year after, 1912, the Americans constructed the Canlubang Sugar Estate in Laguna and the San Carlos Milling Co., in Negros Occidental. By 1919, there were 14 centrifugal sugar factories in operation, replacing hundreds of muscovado mills. A greatly expanded sugar trade with other countries sparked the proliferation of large sugar estates and new technologies like cast iron rollers powered by steam engines were imported from Europe. New cane varieties from Indonesia and Tahiti replaced most of the lower-yielding local varieties. Lime began to be used as an aid to clarification. Oven-like furnaces fired with bagasse were introduced when firewood became scarce and expensive.( Sugar processing and sugar plantations mainly caused the deforestation in Negros ). Vacuum pans were installed in some of the bigger haciendas in Luzon in the early 1900’s. The major expansion of sugarcane production occurred during the 20th century where new technology in sugar milling and the provision of adequate financing propelled the growth of sugar production and establishing it as the Philippine sugar industry. After World War II , further growth of the sugar industry occurred mainly due to the preferential treatment of Philippine sugar in the lucrative U.S. market. Sugar was the country’s major export (Zabaleta, 1990) and for a time , it contributed about 20 % of the country’s foreign exchange earnings. At present, sugarcane is grown in 17 provinces , distributed in 8 regions from the northern Luzon (Isabela, Cagayan ) to Mindanao ( Bukidnon, Cotabato, Davao ). Popularly known as the sugar bowl of the country, 12 out of the 28 operational sugar mills in the country are located in the Negros (Panay, Leyte and Cebu all located in the Visayan region) producing 56% ,20% - from Tarlac and Batangas (Luzon), 24% - comes from Bukidnon (Mindanao).Negros and Panay Islands with its 17 operational mills, is the primary cane-growing region accounting for about 55 percent of the total land area planted to sugar cane.
Summarized facts about the Philippine Sugar Industry(2012)
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422,384 hectares ;cultivated by 62,000 farmers, and harvesting 57 TC/ha . There are 28 sugar mills operating at 66% capacity giving an average recovery of 1.8 Lkg/TC ,14 sugar refineries ,4 bioethanol distilleries producing 25% of the mandated ethanol market Sugar Yield: averages from 2.2 – 2.4 million metric tons.2012 . The World Market Price of Sugar: 19.27 – 20.31 US cents. Composite price of sugar based on Sugar location (A – export, Bdomestic consumption, C-reserve, D- World Market) as of October 2012: P1,125 while it was P1,257 last October 2011:Source of Data: SRA Strat Planning Seminar, November 10-11, 2012, San Mateo, Rizal Of the 422,384 hectares planted with sugarcane by 62,000 farmers, about half is owned by about 1,860 planters (or 0.03% of the total) whose land ownership range from 50 hectares to 100 and above. They are also the major stockholders of 28 sugar mills and 15 refineries. They also own the interrelated businesses in the production chain- the fertilizers, pesticides and farm implements, trucking etc. Because they control over land asset is enormous , they are not only the economic elite but also political elite. Moreover, they are also the "king makers" .Most of the Philippine political leaders, came from sugar barons. They are a big power bloc in the national politics( Deduro,2005 )http://www.agriworkers.org/en/post/resource-materials/38 With this close to half a million workers currently involved in cane growing ( 310,000 are found in Negros; There are 24,000 industrial sugar mill workers and 18,000 are in Negros ) , makes the sugar industry as one of the largest employer in the country . Moreso, 5-6 million individuals are indirectly employed. This represen s close to 7% of the country’s population (SRA,2012 ). This great employment also brings huge problems as sugar production is seasonal. In sugarcane plantations ,there are 2 type of workers, namely: dumaan and sacadas. The dumaan" (permanent farm workers) work the whole-year round, but for 2 to 3 days a week only during "tiempos muertos" or "dead season" .The sacadas" (migrant workers) work in the haciendas during planting and weeding , cutting and loading of sugarcane during the milling season (October-May) (Deduro, 2005 ). The situation for seasonal workers (sacadas) who work mainly during the harvest season and are paid at PhP 170/ton but some planters pay as low P120/ton of cane harvested and loaded to the trucks. The other jobs in the farm are customarily paid as pakyaw or piece rate system ie. PhP 1,200/ laksa but some pay only PhP500(1 laksa = 10,000 cane points) .The pakyaw or piece rate workers are poor peasants and settlers who till unproductive, hilly land and need to work at odd jobs to augment their incomes. Others are landless farm workers who move from one hacienda or farm to another for work(Deduro, 2005 ).Most of the farmworkers do not have job security . The government mandated minimum daily wage for agricultural workers is PhP250 but compliance to this is so low. While the farm workers receive low wages, the patronage relationships with the planter/landlord intensifies .During lean months, the planters provides, then deducts the long list of debts during planting/harvesting season leaving the workers still heavily in debted and the cycle continues. Eversince, the sugar workers and their families had been living in poverty, hunger, and misery. Malnutrition is occurring in the whole country but more severe among sugar workers and their families. In Negros, the yearly rate of increase of malnutrition is 8.89% and illiteracy is common which could explain the preponderance of child labor. The future is so bleak for the youth so they go to the cities(Manila, Cebu or Bacolod ) but only to find themselves as workers in construction , house helpers, odd-job seekers, or prostitutes and lawless elements. They join the ranks of unemployed , underemployed ,and squatters in the cities.
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Sugar Industry Benchmark Figures Listed below (Table 1) are sugar yields by country expressed in Lkg/ha, TC/ha (Ton cane per ha), Lkg/TC (50 kg-bag/ton cane) and % sugar recovery.
Table 1. Sugar yields of selected countries country (Source:Sugar Master Plan,2010) Country Lkg/ha TC/ha Lkg/TC % Recovery 1. 2. 3. 4. 5. 6. 7. 8. 9.
Columbia Australia Brazil Guatemala China Thailand India Indonesia Philippines
269 243 212 197 171 138 122 117 113
125.60 90.00 71.97 87.20 61.17 68.63 70.12 81.40 60.69
2.14 2.70 2.94 2.26 2.54 2.01 1.74 1.44 1.86
10.70 13.50 14.70 11.30 12.70 10.04 8.70 7.21 9.30
Sugar yield data of selected countries showed that the Philippines has the lowest yield in terms of Lkg/ha. Land productivity-wise (Lkg/ha) , Columbia is the first producing 2.38 times more sugar per ha compared to the Philippines; second is Australia, 2.15 times; third is Brazil, 1.88 times more and fourth is Guatemala with 1.74 times more. Thailand produced 22 % (25 Lkg/ha) more sugar than the Philippines. (Sugar Master Plan,2010) The 8 countries have higher sugar yield than the Philippines for two basic reasons: 1)They produced higher tonnage yields (TC/ha) and 2) Countries like Brazil, Australi, and China, the top 3 countries recovered more sugar per ton cane at 14.%. ,13.5% and 12.7%, respectivey. Indonesia and India (which produced only 1.44 and 1.74 Lkg/TC), respectively) had the lowest sugar recovery . Per unit weight of sugarcane processed (cut, load, transported, crushed, boiled, and crystallized), Brazil obtained 58% more sugar (52 kg sugar per ton of cane); Australia obtained 45% more sugar (42 kg sugar per ton of cane) and China 36.5% more sugar (34 kg sugar per ton cane. Thailand, our nearest sugarproducing neighbor, obtained 15% more sugar (7.5kg sugar per ton cane). These yield coefficients are important when we consider market prices of sugar for both the domestic and the world markets. The high sugar yielders also have lower costs/kg sugar produced. If we are to assume a constant costs stream (per ha) set at P75,000 to PhP 85,000, the costs in kg sugar (PhP/kg) and cost expressed as USD cent / lb-sugar , the Philippines produced the most expensive sugar at US cent 13-15/lb at an average production of 113 Lkg/ha (60 TC/ha, 1.80 Lkg/TC). Our good famers yielding an average of 80 TC/ha and 2.4 Lkg/TC yielding 192 Lkg/ha = 9,600 kg sugar are producing sugar at 9 US cents/ lb. Considering the world market price of sugar at 18.8 US cents/ lb,this year 2013, our high yielding farmers would remain viable as their marginal profit margin ranges from 7-9 US cents/lb. AFTA – CEPT 0-5% tariff by 2015 The key industry leader and players’ main immediate concern is year 2015. When AFTA-CEPT Asean Free Trade Agreement- Comprehensive shall be fully implemented, tariff should be 0-5. Both the GATT -Uruguay Round and the ASEAN Free Trade Area Agreement (AFTA) prove insufficient to keep farmers profitable when sugar prices fall below the Philippine average cost of production. The raise the
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question whether the Philippine sugar industry can survive when sugar is allowed to be imported in unlimited quantities at those levels ( Zabaleta , 1997 ) Is there a sufficient cause of alarm regarding AFTA-CEPT? %. The main apprehension is Thailand as it produces up to 10 million metric tons sugar, and they consume only 30% and exports the rest (70%). The anticipation is that Thailand will flood the Asian (east, southeast) market once free trading starts by 2015.Thailand is being singled out as due to the following: 1)
Thailand is our nearest neighbor. It has an advantage over Australia due to distance.
2)
Australia produces less and exports less sugar than Thailand.
3) Thailand produces slightly cheaper sugar than us (0.12 - .14 US c/lb compared to the Philippines’ 0.15-0.17 US c/lb).This slight advantage is due to Thailand’s higher tonnage (68.63 TC/ha) and sugar yield (2.101 Lkg/TC). Its production cost per ha is cheaper (30%, Dy,2012)because fertilizer is purchased at a cheaper price and it has better roads (farm to main roads). But the other issue should be …“Are the Filipino farmers getting lower revenue from sugarcane compared to their counterpart?” To answer this question, the revenues of both (Thai vs.Fil) were estimated using the following variables: Per Tonne Cane
Thai farmers are paid by the tonnage . They are adopting Cane Purchase Sytem (CPS) . Thai farmers are paid 30 US$/per ton. At 30 US$/TC , their gross revenue per ton is about PhP1230. The Philippines adopts planter –miller sharing system whereby the planter receives 6065% share of the sugar output and the rests to the miller. Planters also have a share on the molasses. Per ton, Filipino sugarcane farmers earn PhP 1,580 (P1100/kg x 2 Lkg/TC x .65 + (P150/ TC-molasses) Net revenue per ha The Net Revenue is computed by estimating the Gross Revenue less Total Costs/ha. The estimate of gross revenue used the following coefficients…. 65:35 sharing, 2 Lkg/TC ,3% molasses, 60 TC/ha, and PhP950/TC as the costs to produce a ton of cane.
Net Revenue: = (P1100/kg x 2 Lkg/TC x .65 + (P150/ TC-molasses) x 60 TC/ha ) - (PhP 950/TC x 60 TC/ha ) = PhP 94,800 -PhP57,000 = PhP37,000 Thai: 68 and 73 TC/ha & 30 $/TC ; and PhP 750 to produce a ton of cane Thai Gross Revenue= 68TC/ha x PhP1230/ton= PhP83640, 73TC/ha x PhP1230/ton= PhP89,790 Cost/ha = 68TC/Ha x P750/TC = 51,000
, 73 TC/Ha x P750/TC = PhP54,750
Net Revenue (68TC/Ha ) = PhP83640 -PhP51,000 = PhP 32,640 Net Revenue (73 TC/ha ) = PhP89,790 - PhP54,750= PhP 35,040 At P1,100/TC, 60 TC/ha and 2 Lkg/TC, the Filipino sugarcane farmers are slightly better off than their Thai counterpart. As the tonnage increases and the sugar recovery expressed as Lkg/TC increase , the Filipino sugarcane planters shall fare better than their Thai counterpart with their CPS and slightly lower production costs. Sugarcane planters harvesting higher tonnage (100 TC/ha) and are milling their canes in sugar mill that give high sugar recovery (above 2.0 Lkg/TC), are a lot better than their Thai counterpart.
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Our farmers obtaining yield of about 80-120 TC/ha and sugar recovery of 2.0 Lkg/TC or higher by milling their canes in the best mills (5 of the 28 mills) ,however, are only few .The average yield is 57 TC/ha and a sugar recovery of 1.8 Lkg/TC.
4.0 Factors affecting the sugar industry : in Brief There are at least 5 factors affecting the sugar industry , namely: 1) AFTA-CEPT, 2) peso appreciation, 2) high unit costs of production and 4) low world market price of sugar. The 5th , climate change is not yet considered as a problem. Oftentimes, its negative effects on the crops, economy, and the people is difficult to estimate but it is increasingly becoming damaging in recent years. Yes, there are good yielding years, climate wise. But the not so good to bad yielding years due to climate change (drought , flood due to super hear heavy rains , and super typhoons ) are becoming more frequent in recent decades ( Rapera et al.2011 ). This production environment will stay with us from hereon. The central issue or concern that must be addressed shall be: who will be affected most? There are 3 groups of farmers and millers. They are the low, average and the high yielders. Farmers: Low yield = 30-40 TC/ha, Ave yield = 60 TC/ha ,High yield = 80-100 TC/ha and above. Millers: Low sugar recovery = 1.7 Lkg/TC and below ;Average sugar recovery = 1.8 Lkg/TC and High sugar recovery = 2.0 and above As discussed earlier, the medium (Ave. yield = 60 TC/ha) and high yield-farmers (80-100 TC/ha) and above will not be affected much. This is like saying that the low-yielding farmers will be affected most. There are two school of thoughts on who will survived better and they are as follows: First.Small farmers will survive better. They have no high overhead costs, they use family labor (their children below 18 years old who will not sue them for child labor). Farming for them is family affair. As such, they can do cost-cutting measures early. Neighbor farmers (who are friends or relatives) can do exchange labor (bayanihan). It means that there is no money involved. They can easily shift to growing other crops while retaining manageable areas for cane production. With or without AFTA-CEPT or the other 3 factors mentioned above, small sugarcane farmers (the Agrarian Reform Beneficiaries or ARBs) need to diversify their farms as explained in end notes No. 1. Second.Large and high-yielding farms, while they have a“deep pocket” (or high y-intercept), also have high overhead costs (administrative, regular worker, building/ machineries repairs, electricity/ water bill, depreciation expenses etc.). The decrease in the price of sugar shall decrease their net income. The decreased income will mean cutting down on non-essentials (tourism or sending their children to Europe, USA, to study and many others!). Will they be doing such? Both the small and big planters will do cost-cutting measures as in 1) prolonged/ extended ratooning cycles. This shall immediately decrease the labor requirement in crop establishment (land preparation, preparation/ selection of can points, planting, basal fertilizer application etc.). This shall be P30-35,000/ha and about 35-40 mandays reduction in labor. There shall be more reduction in labor demand as yield decreases due to extended ratooning and reduction in fertilizer application. Consequently, a reduced yield which means reduced labor for harvesting and hauling. For instance, the yield decreased from 80 TC/ha to 50 TC/ha, shall lead to about 30 mandays lost (an average 1.0 ton is cut and loaded by one (1) tabasero (cane cutter/ loader).As the industry, rule of thumb, 5 tons sugar produced, employs 1 sugar worker. The decrease in sugar yield shall inevitably lead to labor/employment reduction . Using the following coefficients, we estimated the job reduction as a consequence of decreased yield as shown below… Given: 1 labor per 5 ton sugar produced ; Yield reduction: a)10% of 2.3 Mt = 230,000 mt, b)20% of 2.3 Mt = 460,000 mt, c)30% of 2.3 Mt = 690,000 mt .
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The equivalent labor displacement (direct labor) of these yield reductions shall be: 46,000, 92,000 and 138,000 workers for 10, 20, and 30% yield reduction, respectively. The industry, with its current state , directly employs about 0.5 million or more and its indirect employment or multiplier effect is another 5-6 million jobs generated on the supply and consumption chain (or 10-12 times of the direct employment). Following effects of yield decline on the reduction of indirect employment of the industry gives the following result: 460,000 – 552,000 ; 920,000 – 1,100,000 ; 1,380,000 – 1,656,000 indirect employment , for 10%,20% and 30% yield reduction, respectively. In addition, a 20% yield reduction means foregoing the 120,000 mt sugar export to US while a 30% yield reduction shall mean an importation of about 500,000 metric tons (290,000 mt + 200,000 buffer stock). At 19 US c per lb price of sugar in the world market. This require about USD 21.436 million (@ P39: 1 USD = 8.36 billion pesos) estimated as follows: 19 US c per lb = USD 428.718 per metric ton; 428.718 USD/mt x 500,000 mt = USD 21.036 million (@ P39: 1 USD = PhP 8.36 billion). Handling, transport, storage, loading/ unloading costs are not yet included. The survival options to the low sugar price on the part of the planters (big or small) can be in two ways: a.Cost reduction as described above and b ) Shift to other crops (any crop which to their perception shall allow them to survive). Specifically for the small planters, they will plant food crops (upland rice, corn, gabi, cassava, sweet potato) and vegetables (lots of species). A planter in eastern Batangas, is into livestock (native chicken, dairy cattle, and carabao). Ruminants mostly consume cellulosic materials which are’ produced in abundant quantity (12-15% tonnage is sugarcane tops). During non-milling, sugarcane tops could be made into silage , napier grasses could be planted, and sugarcane can be detrashed as added roughage during non-harvesting months of May, June, July, August, September to October. Increasing yield (TC/Ha) and improving sugar recovery in the sugar mills are 2 interrelated option which needs to be done with or with out AFTA-CEPT. This is what the industry leaders are trying to do. 5. The Sugar Industry Challenge: Survival How will the sugar industry avoid the anticipated or impending difficulties
Unemployment/ dislocation of labor
Reduction in income of farmers
Dollar outflow due to sugar importation – a consequence of yield reduction
For the industry to overcome the difficulties listed above, the industry should survive. No doubt , it will survive as in the past crisis that plagued the industry. To survive requires improvement on the current performance. The industry leaders and key players1 (farmers, millers) have set the following targets…
Increase sugarcane yields from 60 TC/ha to 75 TC/ha
Increase sugar recovery from 1.8 kg/TC to 2.1 Lkg/TC
In short: increase sugar yields from 113 Lkg/ha to 158 Lkg/ha The Sugarcane Industry Road Map prepared by SRA adopted Sugar Master Plan yield targets. In addition, the SRA road map proposed that sugarcane areas must be expanded from the current 422,384 hectares to 465,000 hectares. Furthermore, the sugar industry road map includes the following initiatives:
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Sugar Master Plan (2010-2015)
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1.
The rehabilitation of sugar mills and refineries
2.
Inclusion in the IPP the rehabilitation of sugar mills and refineries, facilitate financing windows
3.
Establishment of mill support industries such as local fabrications of mills, refinery equipment
4.
Passage of the law the ‘Sugar industry development act’
The industry must also move towards a sugarcane agro-based industry. diversification.
This means product
To identify or locate the point or stage of occurrences of the gaps and inefficiencies in the system, an analytical tool called ‘value chain’ analysis (VCA) was adopted (Mendoza,2012). The key process involved, key actors, service/input/information, enabling environment – the supply chain, the consumption chair (distribution, utilization) are shown in Fig 1. The key result areas identified/illustrated in the value chair analysis and the gaps are to be addressed as clustered into: 1.
Cane growing
2.
Cane processing – cane transport is also included
3.
Marketing – consumption utilization
Cane Production The Sugar Industry is a typical agro-industrial set-up whereby sugarcane grown in the field is processed in the factory (centrifugal sugar mill and/or muscovado mill) to extract juice and clarify the juice to produce raw and refined sugar. The 2 stages of sugar production complement each other. It is commonly stated that sugar production starts in the field via the sugarcane plant. Cane quality and quantity affects the sugar mill performance. Small farmers and big planters alike would be motivated to adopt farm practices to make the sugar land productive and to supply quality canes to the mill if they in turn received “just sugar recovery” (Lkg/TC). Factors affecting sugar mill performance are so intertwined with the quality of canes being milled. Improperly or unbalanced fertilized canes , imatured or overmatured, burnt and trashy canes have low recoverable sugar. There are some mills that are efficient (giving higher sugar recovery to the planters) while others are so in-efficient giving very low sugar recovery which is like “highway robbery” quoting the words of one sugarcane planter. There are planters who are already getting more than 100 TC/Ha but they are few such that their high yields could not offset the low yields of many planters. Diagnosing the cause(s) of low yield leads to the the identification factors affecting sugar yields .Of the major determinants of sugar yield include land preparation, variety, timing of planting, fertilizer (Mendoza, 2012). Land preparation is critical as it determines the time to plant, the soil environment that affects germination, weed growth, and water retention during the dry months. Progressive and high yield farmers invest or put priority to big tractors (120 Hp) as this is the tractor that could deep plow the heavy soil and sugarcane stump left in the field after first and second ratoon. The rule of thumb is that 2Hp is required per ha. This translates to around 7,000 tractors for the 420,000 ha grown to sugarcane ( 1 tractor = 120 Hp). Knowing that adequate and timely land preparation takes pivot role in increasing sugar yield, facilitating tractors purchase is necessary. Several small sugarcane farmers (80% of the 62,000 planters) do not have money to buy tractors (DAR & SRA are jointly implementing group farming scheme). This SRA project is a move in the right direction but the farmers group should be organized into cooperatives so they
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could take advantage of free tariff for imported machines and also fertilizer inputs. If a group of farmers buy tractor, can they pay it back? Earlier , Mendoza (2012) did an ex-ante financial analysis exercise to answer this question. Two prices of tractors were considered: P3 million if the tractor was slightly used and P5 million if the tractor plus implements were all brand new(Tractor Hp = 120). Four (4) interest rates were considered and they are 6%, 8%, 10 %, 12% interest. Declining balance of computing interest per year was adopted. Five(5) and ten (10) years debt (principal + interest) payment schedules were adopted . The value added of the tractor was reflected in various added yield, namely: 20, 30, 40, 50 TC/ha, respectively. Added yield was used instead of the total tonnage yield to denote that the money that will be used in paying the tractor amortization is the result of improvement in farm operations. Two (2) parameters are constant and they are the farm area (60 ha) that the 120 hp-tractor will service and the total costs per tonnage at P820. (This costs straddle planting to hauling canes in the mill). Planter and miller sharing (65:35) is the 3rd constant. Sugar recovery (Lkg/TC) was considered variable to reflect the role of mill improvement has significant impact on the profitability (competitiveness) of sugar production. The following sugar recovery were used: 1.5, 1.6, 1.7, 1.9 ad 2.0 Lkg/TC. Finally, two prices of sugar were used, namely a) the current price @ P1,225/Lkg (Nov. 22, 2012); b) the anticipated price of P1,100/Lkg (2015, when there is free trading of sugar. Results of the ex-ante financial estimate for the debt service of the PhP 3M and PhP 5M tractor per year at 10 years amortization and varying interest expenses are shown below: Interest Expense
Debt Service (PhP 3 million)
PhP 5M
6%
P0.36 million
0.60
8%
P0.39 million
0.65
10%
P0.42 million
0.70
12%
P0.45 million
0.75
Can the farmers farming 60 ha repay back this tractor in 10 years and have net cash for tractor maintenance, repair, operation and still have higher profit margin than when they do not have tractor? The financial analysis showed that an increase in yield of about 50 TC/ha and 2.0 Lkg/TC will easily enable the farmers to pay back their tractor and still enjoy a partial net cash of about P32,000/ha. Increasing yield from 50-100 TC/Ha shall require an increase in fertilizer application. The farmers do not have enough money to buy fertilizer. Short term production loan must also be provided. This means that assisting the farmers should include other inputs (fertilizer + herbicides if necessary). In short, in addition to the loan on fixed capital (tractor + implement, and irrigation pumps for some areas with shallow ground water) ,short term production loans must be provided to the farmers. Equally important is the credit policy, specifically, on interest expense . Other countries charge very low interest expense (less than 5%). Our farmers are charged more than 12% interest. This shall be an unduly heavy burden for them to repay their loans. For instance, if their profit margin is 24%, then, half of it is eaten by interest expense! This is unfair for the farmers for their ‘sweat and tears’ under the heat of the sun. Yet, we expect them to deliver the goods for our economy and the country. A 6% interest expense is the compromise. The debt service for the P5M tractor, obviously, requires higher debt service (67% more) than the P3M tractor set. The purpose of including the 2 sets of tractors (P3M vs P5M) is to find out if farmers who opted for a brand new set of farm implements could afford it, meaning, they can pay the debt service. Net after debt service at 12% interest expense was already negative even at 50 TC/ha and 2.0 Lkg/TC. It is positive starting from 10% interest expense. Again, the net cash after debt service is only attractive for farmers at 6% interest expense and 50 TC/ha x 2 Lkg/TC, yield levels. Note: 50 TC/ha is an added yield
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while the 2 Lkg/TC is the target sugar recovery after mill upgrading and repairs in the sugar mill where planters mill their canes. It is important note that many factors affect sugar recovery. Ehe a factory is alone, then , the tendency is a lower sugar recovery as the planters have no other option where they could mill their canes. Highly indebted mills tend to give lower recovery so they could increase their revenues for debt service. There are 2 critical nodes (per this production stage in VCA analysis). First , is the financial aspect which ‘push up’ the debt service of the farmer’s credit – the interest expense. The base for interest expense is the price of the tractor. This relates to the number 2 critical node – the price of the tractor. Why are tractors so expensive? The main reason is that they are all imported! (We do not have data for tractors but for cars sold in the Philippines, they are 1,000 – 2,000 US dollar more expensive). If they are very expensive because we import all the components, then, this must be addressed soon (This will be discussed later). Sugarcane Processing In 1991, the sugar industry started to implement a Rehabilitation and Modernization Program to upgrade the mills left unrepaired during the crisis in the 70s and 80s. Some of the mills have invested and completely re-built and changed their equipment, making them the equivalent of new mills, and others have made major investments in upgrading or adding equipment- it is undeniable that many mills are also maintained in their dilapidated state and used as milking cows by their proprietors. These mills not only produce inferior sugar which oftentimes fetches lower prices, but also prevent farmers from optimizing the potential of their farms. They are prone to breakdown and cause harvest losses and have very poor extraction, significantly contributing to the decline in sugar recovery per ton of cane Since a sugar price shakedown will also hurt those not guilty of complacency, such as investors in new or rehabilitated mills, the only answer would seem to be for the SRA, given proper authority, to impose mandatory recovery rates and capacity parameters as conditionalities in granting milling licenses. Other options would be the imposition of market-based incentives, fines and stricter regulations, either through the SRA or selfregulating mechanisms. While ruinous competition by overlapping and interloping mill districts is a malaise, the other extreme where a solitary mill takes advantage of its position to maximize profits at the expense of the farmer is just as serious a malaise. The industry will have to come to terms with this problem sooner or later and a re-study of the situation is called for. In Queensland, redistricting has been carried out with the help of state authorities who enforce rights-of-way and build the necessary infrastructure. Perhaps a similar approach should be undertaken by the Philippine government(Zabaleta, 1997). Mr. Zabaleta is the former president of Philippine Sugar Millers Association . Two decades after Rehabilitation and Modernization Program to upgrade the mills , more than a third of the 28 sugar mills in the country are still inefficient (below standard sugar recovery of less than 1.8 Lkg/TC). This situation is leading to a collateral damage which is the widely known phenomenon called pole vaulting . “Pole vaulting” – the milling of canes outside the mill district. For instance, canes from Pasi, Iloilo are hauled through RO-RO to Bacolod, then to VMC. Sagay grown canes (40-50 km away) are milled to VMC. When asked, why sugarcane planters ‘pole vault’ their canes ? It is for the simple reason that they earn more per ton cane (per truck @ 20TC), the high sugar recovery and high hauling subsidy given (P320P400/TC) enable them to earn as much as P9,000. This is not to mention other social reasons. Obviously, pole vaulting increase the energy bill and the carbon foot print of sugar (Mendoza, 2011), decrease the supply of canes in the affected mill and decreasing further their low capacity utilization. In turn , this affects their revenue streams which dis-allow them to plow back their remaining revenues for repair, for preventive maintenance, moreover, for upgrading their mills to arrest pole vaulting. Meanwhile, the bigger and more efficient mills giving high sugar recovery (2.0 to 2.7 Lkg/TC) also benefits from additional bagasse for fuel and molasses for ethanol production. These bigger mills will have added income as they pursue electric power cogeneration. This shall more than offset the high hauling subsidy
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their giving to the outside mill district planters. “Pole vaulting is a consequence. The main solution is to upgrade inefficient mills|”( discussed further in end note no. 3 ).The low sugar recovery of mills is triggering an energy expensive transport of canes( hence, the carbon foot print of sugar,( Mendoza,2011) to bigger and more efficient, high sugar recovery giving mills. A parallel ex-ante financial analysis exercise as in the tractor purchase in the farm to improve cane yield was also done for upgrading and rehabilitating sugar mills (Mendoza,2012). Two (2) scenarios were assessed, namely: 1)About P300 million - the amount to be used for rehabilitating or upgrading the smaller mills ; and 2)About P1 billion - the amount to rehabilitate and upgrade the bigger mills. The assumptions or key technical coefficients that were used in the ex-ante financial analysis exercise were as follows: a) Cost of money: 6, 8, 10, 12% interest expense declining balance method of computing interest expense by year ; b) amortization period: 5, 10 years The debt service for the P300M and P1 Billion loan are show below: P300M Interest Expense (%)
Years to pay The loan
5 years*
10 years*
P1 Billion Interest Expense (%)
6%
8%
10%
12%
6
8
10
12
59
62
65
68
197
207
217
227
36.3
39.3
42.3
45.3
121
131
141
151
*PhP M/year represents the average debt service;(principal + capital) per year in the 2 loans (P300 & P1 Billion)
As shown above, there are 2 main factors that influence the debt service aside from the capital base. These are the amortization schedule (5, 10 years) and interest expense (6 to 12%). Obviously, longer amortization schedule and cheaper credit (6%) would allow easier repayment due to lower debt service. The next concern is… if the smaller/bigger inefficient low sugar yielding mills are accorded loan facility, will they be able to pay back their loans. In both scenarios, the small mill (1), and the bigger mill (2), the amount of added canes to be milled (tones cane) in 3 sharing schemes were estimated i.e. Current sharing: 65: 35 , 60:40 ; 55:45 In the 2 scenarios, the added canes and net income were estimated, the added income is estimated as follows: Added income = added Lkg/TC x milled canes x Price/Lkg In addition to sugar, the mill produced molasses. Income from molasses was estimated as follows: Molasses = 3% x Tonnage (TC) x Price per ton ;where: Price per ton = P6,000 Thus, the total income for the mill is the sum of the added income from sugar and molasses estimated as follows: Total income = added income due to sugar + income from molasses The total income and all other parameters were estimated at cane yields starting from 200,000 to 1,000,000 million tonnes. Thus, results are shown in Table 3.
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How much cane should the mill process to pay the yearly amortization of their loan! This was estimated as follows: Mill share = 0.35 ,Yield increase = 0.5 Lkg/TC ;Mill share for TC = 0.35 x 0.5 = 0.175 Lkg/TC Revenue from processing 1 ton cane : Sugar=0.175 Lkg/TC x P1,100/Lkg/TC = PhP192.5 Molasses Revenue: 3% per TC xP6,000/TC =0.03 x 1 TC x P6,000/TC =(P180)(.35) = P63/TC Mill revenue per TC = Sugar + molasses =P192.5 + P63/TC = P255.5/TC @ 35% mill share =P272/TC @ 40% mill share =P306/TC @ 45% mill share Hence, to be able to pay the P59 million amortization ,the mill should process about 23,092 Tonnes Cane P59,000,000 = 23,092 Tonnes Cane 255.5/TC
The summarized estimate for the 5 and/or 10 years loan amortization schedule at three sharing scheme, 6 and 12% interest and 5,10 years amortization schedules are shown in Table 3. Table 3.. Canes to be milled* to pay yearly the amortization of P300M loan Interest Rate 6% 8% 10% 12%
65:35 Years to pay 5 10 231 142 243 154 254 165 266 177
Sharing System 60:40 Years to pay 5 10 217 133 228 144 290 155 250 166
55:45 Years to pay 5 10 193 118 293 128 212 138 222 148
*in thousand canes throughout the milling season, Canes to be milled = Amount to be paid/ year (PhP million)/ Revenue/TC Revenue/TC = Revenue Sugar + Revenue Molasses
A brief summary is described below: 65:35 sharing scheme 5 years amortization :230,920 tonnes 266,145 tons , for 6% and 12% interest, respectively. 10 years amortization: 141,968 tonnes 177,193 tonnes, for 6% and 12% interest, respectively. 60:40 sharing scheme 5 years amortization :216,912 250,000 ,for 6% and 12% interest, respectively. 10 years amortization:133,356 166,444, for 6% and 12% interest, respectively. 55:45 sharing scheme
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5 years amortization :142,810 222,222 tonnes , for 6 and 12% respectively. 10 year amortization :118,538 147,950 tonnes , for 6 and 12% respectively. P300M loan to the mill For the 65:35 sharing scheme, extending the loan repayment from 5 to 10 years shall decrease the quantity of canes to be milled by 33% to generate the much needed revenue (PhP 36.3M) for debt service. As the sharing scheme favor the mill as in 60:40 and longer repayment (10 yrs), the quantity of canes decreased further from 300 to 200,000 tons to earn the much needed revenue for debt service. Even at 5 years, and P1000 Lkg/TC price of sugar, the mill can pay their loans at 300,000 needed cane and P1,000/Lkg. P1B loan to the mill At 800,000 mt to be milled enough revenues (sugar + molasses) could be earned by the mill to pay the 1 billion peso loan even at P1,000/Lkg & P5/kg molasses.But where will the mill get all the canes to be milled. Bank creditor , not only the mill owners should meticulously analyze the cash flow should a decision be made to upgrade the mill with such a huge amount involved. This happened already when the owners of 2 mills incurred PhP7 billion loan to upgrade 2 big mills. Planters are now very disappointed why their sugar recovery decreased (.3-.5 LKg/TC) ? Debt service shall be lighter if the amortization schedule shall be extended up to 10 years and only 6% interest rate. As summarized above, the sharing scheme, interests rate, and years to pay the loan influenced the amount of cane to be milled to generate enough added revenues to pay the yearly debt service for the 2 amount of loans (P300M & P1B).Why a sharing scheme is included is because the current sharing scheme which is mandated by law (65-70% goes to the planters) is cited as the reason why sugar mills are not motivated to repair or upgrade their mills. What is the relevance or implications of these ex-ante financial analysis exercises? 1)
It provides insights/ guide how the mill owners handle their upgrading and rehabilitation.
Costs of money is an important concern. It is obvious that the amount of money for debt-service increase as the interest rate increases (6 to 12%). This shall also demand increased volume of canes to be milled. For huge loans (P1B), it becomes very restricting to mill huge amount of canes. Where will the canes come from? But 800,000 mt will only be sourced from 10,800 ha if the average yield is already 75 TC/ha. 2) This brings to fore the current sharing scheme as always pointed out to be an impediment for the mill owners to carry out upgrading (Note: Thailand is into cane purchase system (CPS). A 65:35 sharing schemes is beneficial to the planters. But it is restricting the mill to do mill upgrading. Debt service for the mill becomes feasible if big volume of canes could be milled at low interest rate and longer amortization schedule. 3) Our sharing system is mandated by law. The sharing scheme has been studied many times but no consensus had been arrived at to shift to Cane Purchase System (CPS). CPS has also its own draw back. It does not promote the production of quality canes as the farmers are paid based on the weight of their canes. In Thailand where CPS is being followed , the mills are encountering such problems. But they are also encountering difficulties on how to pay increased sweetness of canes. For one, what is the starting point ? Sweetness of cane is influenced by weather, time of harvesting, variety and fertilizer application. Early harvested canes are less sweeter than canes harvested during the dryer and cooler months of
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January to February. If CPS will be adjusted to the sweetness of the canes, then, who would want to harvest their canes early or late in the season ?Because of this , CPS could not be the soulution as it brings more problems that arelikewise difficult to manage. Including CPS in current house bill (Sugar Industry Development Act) will be divisive as it invites more debates . As such it will delay further its its passage. Also, it is important to ask “Why are Thais, Australians, Brazilians able to spend much money to upgrade their mils? Does repair or mill upgrading require too much money (base loan) and high interest rate as in the Philippines. In the Philippines, repair, rehab and mill upgrading is expensive because ,1) the mill owners/mangers use it as milking cow or to their advantage , and 2) parts or whole boilers ,instruments such as computers and gadgets are all imported. Their peso cost (exchange rate factor), tariff, and interest rate(a as shown above ) inevitably increased. The challenge The industry players (millers, farmers) need to upgrade/ improve their system .With or without AFTA-CEPT being fully implemented 2016, the need to upgrade/improve our production system remains as the demand for sugar shall be increasing with increasing population. Production efficiency must be improved due to resource quality and quantity are declining. Even without VCA, these are known already.What the VCA accomplished is that it showed clearly the interdependencies of the 3 main stages of the value chain- cane production, milling , and market/utilization of sugar and by-products. Addresing ‘The Mill-Farm Interdependencies’ Improving the mill also requires improving the farm and vice versa This brings us to the next 2 questions: 1) how many hectares of sugarcane should be improved in a given mill district a) to supply the needed canes of the sugar mill that upgrades its system to improve sugar recovery (1.2 Lkg/TC 2.0 Lkg/TC) and b) be able to pay the yearly amortization of P300M loan. Hectares to be improve = Mill Requirement (TC) Added TC/Ha Where added TC/ha = 20, 30, 40, 50 TC/ha yield increase The original average tonnage in the mill district is 40-50 TC/ha Hence, the tonnage yield = 60, 70, 80, 90, 100 The mill capacity is 8,000 mtcd at 150 milling days and 80% capacity utilization. This leads to 960,000 canes to be milled per year.
Table 4. The amount of canes to be milled to be able to pay back the loan (P300M & P1B).
65:35
Ton Cane to be milled (3) (x1000) 300
P1000/Lkg 71
P1,100/Lkg 85
60:40
300
79
85
55:45
300
86
93
Sharing Scheme
Added revenue due to mill rehab
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P1 Billion Loan (2) 65:35
800
210
226
60:40
800
210
226
55:45
800
230
24
Note:1)Debt service for PhP300M is 59,363 million pesos for 5, 10 years amortization schedule, respectively. 2)Debt service for PhP1Billion Loan is PhP 197,121 million for 5, 10 years amortization schedule, respectively. 3)Ton canes to be milled to generate the added revenue to pay back the rehabilitation.
The next question: how many tractors (120 Hp) is required to implement adequate and timely land preparation? Number of tractor =
hectares of cane to be planted tractor capacity (1 tractor = 60 ha)
About15% of planters already own tractor and some already own small tractors The results of estimates showed that about 103 to 113 units of tractors (Hp = 120) should be purchased. The amount required to buy these tractors units using 2 amount per tractor unit ranges from P309M to P339M or an average of P324 million for P3M per tractor + implements. For the P5M per tractor + implements, the amount ranges from P513M to P567M or an average of P 540 M as shown in the estimates below… @
P3M per tractor + implements
= 103 x 3 = P309M = 113 x 3 = P339M Average: P324.5 million @
P5M per tractor + implements
= 103 x 5 = P515M = 113 x 5 = P565M Average: P 540M Earlier , it was pointed out that at 2Hp/ha,hence, the total Hp requirements of the 420,000 ha of sugarlands is about 840,000 which translates to around 7,000 units of 120Hp tractor. At PhP 5 M/unit, the value of the tractors shall be PhP 37 B. Progressive and high yielding planters have already sufficient farm power. Of 80% of small planters cultivating about half of the areas do not own tractor , the amount required to enable our small planters own tractor is aprox. PhP 15 B(PhP 37B x 0.5 x0.8 )
Marketing/ Utilization of Sugar Output Increased production also means increased consumption or utilization. The Philippines Sugar consumption compared to Thailand and US is low: Philippines19-20 kg/cap , Thailand 37 kg ;US45 kg/cap sugar equivalent (more than ½ is High Fructose and Aspartame) It should be pointed out that the 19-20 kg/cap sugar include the 11 million Overseas Filipino Workers (OFW). If the OFWs are excluded in the estimate, our per capita consumption shall increase to about 22 kg/cap. This is still 37% lower than the Thais and 51% lower than the Americans. Less the OFW, by
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2015, the Philippine population shall be 93 million. If our sugar consumption will increase up to 29 kg (7.0 + 22kg), then, our sugar requirement shall be 2.7 million metric tons. The 7 kg increased consumption can be used to fill-up the 13% caloric deficiency of the 30% young people (age below 20 years) who are at their active and highly energetic age, thus, they consume a lot of energy. Sugar is the cheapest source of caloric energy (Rice = PhP10.8/Mcal, Sugar = PhP5.95/Mcal @ sugar price = PhP 22/kg at P1,100/Lkg & Rice = P40/kg). There are many possibilities to increase domestic utilization of sugar. There are various grades of sugar. The industry prefers white sugar. White sugar has been declared to be causing diabetic type 2. By all means, let us avoid consuming white (refined) sugar for the sake of our health (Health is wealth!). Let us shift(campaign) to brown or red sugar for our household. This shall lessen the energy bill and carbon emission for the sugar being consumed. White/refined sugar requires additional energy refining. Yet, no additional health value is realized. In fact, additional health risks as it increase our chance to incur diabetic type 2 and all the associated illness after having diabetes. Let us maximize the use of red/brown sugar in food preparation and ready soluble or pre-mix drinks. Premix coffee: Kopico Kopiko or Kapeng Pinoy (Pnoy has 80% approved rating) Instant juices like Tang, eight o’clock, nestea etc. Why don’t we prepare our own juices like Pnoy Tea, Ten o’clock (10:00 am is our coffee, merienda break). (Note: Please serve Kapeng Pnoy or Kapiko +Nilupak na gabi or kamoteng kahoy!) Meanwhile, why are we planning only for 2015 or 2016? The very optimistic and low estimate done by the accountants of England and Wales place our population at 85% more (82 million) in 6 decades from now. Sugar consumption by then, if we are already 182 million shall be 5.278 million metric tons (2.5 x more than our current yield). If our yield shall be 75 TC/ha x 2.1 Lkg/TC = 7.875 ton sugar per ha, we need to plant 670,222 hectares. SRA target area is only 465,000 ha. The high domestic price of sugar invites smuggling. In the medium and long term, the domestic demand will pose a great challenge to satisfy. Hence, along with the target of increasing yield to increase the effective demand for sugar in the country instead of just allowing sugar analogues or alternative sweetener, (HFCS, aspartame) which has been reported to give health impairment (allergies, other serious illness like cancer?) , sugar smuggling should not be tolerated. Measures should be undertaken to put behind bar, the culprits. The Sugarcane Industry: from hereon An industry leader claimed “once labelled as sunset industry, the sugar industry had a proverbial shot to instantly make it a sunrise industry’. This could be attributed to the additional product it is generating …..power . Co-generated power or Cogen is evolving as the 2nd industry within the sugar industry”. Bagasse fueling for power has been done in the sugar industry since its inception (100 years or more in the Philippines) starting from the muscovado sugar (direct fired-vat) to concentrate the juice to the centrifugal method of sugar manufacture. Raw sugar processing and power generation are interdependent (Amarra, 2015). This makes the sugar industry as the premiere industry in the country to be external power neutral or it can even be a supplier. However, it was only recently that the sugarcane industry could export or sell extra-power to the grid. Due to changing policies (feed-in-tariff incentives as shown in Table 1), a growing number of sugar mills had installed COGEN. There are now 3 sugar mills [First Farmers (21 MW), Crystal (9MW), CASA (8MW)] where COGEN facilities are installed, generating a total 38 MW. There are still 5 more sugar mills that will operate soon generating about 122 MW (Amara, 2015). With increasing costs of cane
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production, and raw sugar processing, additional revenues through COGEN spells renewal of once sagging sugarcane industry But COGEN in the sugar mill undoubtedly, has also some problems which should be attended to. In the earlier set-up , bagasse fueling of boilers do not yield extra income, though the mills realized reduced costs as bunker oil. Many mills simply used bunker oil for start up operations but once bagasse is available, the source of fuel is automatically shifted to bagasse . High priced oil made other mills to altogether forego using bunker oil and instead, they use biomass (wood, napier grass, baled trash and stored bagasse). The existing sharing system under the law (R.A. 809) is that only the main product (sugar) and co-product (molasses) are shared. This should be extended to the other by-products (mudpress, mill ash) including bagasse as earnings through COGEN is derived from bagasse. This is especially true for purely privateowned mills (except the coop-owned mills). Thailand is into cane purchase system (CPS), thus, the mill owned all the canes. This may not be true also as the planters will soon demand higher price of their canes. Earlier, the price was indexed to the amount of sugar that could be processed per ton of cane. With COGEN, they could also compute the extra-income (less the energy for raw sugar processing) generated from COGEN. Obviously, they will demand add-on price to their canes. Everybody recognizes the changing and more difficult production environment (climate change, increasing cost of production – high priced oil fertilizer and other inputs, high priced labor) and free-trade relations (due to globalization, AEC in the region). Both partners of the sugar industry, will be happy if both realized benefits due to COGEN. The planters grow/produce the feedstock. Simply stated “ COGEN starts from the field”. Sugarcane production will spell the difference especially as the Philippines has more than 100 M population Philippines. The optimum area (0.41-0.43 ha/person, CIA, 2003, Mendoza, 2008) had been exceeded 3.3 times. Because of this, the 65,000 sugarcane planters will grow sugarcane continuously if they perceived they earn more by planting sugarcane. The initial assessment that COGEN shall ensure the economic viability of the 2-major products of sugarcane-based industry (food sugar and COGEN power) is a big boost to the current 2 billion dollar (USD) earnings of the industry directly supporting/employing 0.700 million people and indirectly employing 5 million more. If all the mills in the Philippines will construct COGEN plant (High pressure system @ ~ 65 bar, with excess power 55 kWh/tonne cane ) revenues alone from the feed-in-tariff at P6.63/kWhr amounts to PhP2.655 billion (Table 3) on a per day basis. Even if only half of the 27 sugar mills will install COGEN facilty ,at an average 116 milling days, the gross revenue shall be about 154 billion pesos (3.5 billion USD).
Table 3.Estimated Exportable Power Potentials of the Sugar Mills (in kWhr)
Location
Luzon Negros Panay E. Visayas Mindanao Total
Capacity, TCD
Cogeneration System
35,500 93,200 3,500 8,000 40,000 180,200
Medium Low Pressure Pressure High Pressure 11,833 41,417 75,931 31,067 108,733 224,263 1,167 4,083 7,486 1,000 3,500 7,219 13,333 46,667 85,556 58,400 204,400 400,453
FITs(P6.63/kW) Potential Income 503423 1486864 49632 47862 567236 2655003
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Low pressure system @ ~ 30 bar, with excess power in kWhr/tonne cane=10
Medium pressure system @ ~ 45 bar, with excess power in kWh/tonne cane=35
High pressure system @ ~ 65 bar, with excess power in kWh/tonne cane =55
Source : Amarra,2015
Transforming the Sugar Industry The sugarcane industry is not a stand alone industry . It must be supported by Science & Technology . A clear policy on S/T Role must be written into National Industrial Policy(NIP). From the VCA of the sugarcane industry (Fig. 1), a long lists could be drawn up how the industrial policy of the country could help transform, increase the productivity and global competiveness of the sugar industry. The VCA illustrates the A-Z of the processes involved in the sugar industry. A resource use efficient, sustainable, productive, and climate change adaptive are the 4 determinants of a stable agro-based industry that can provide decent and livable wage to the workers and professional staff of the sugar industry. Examining both the inputs side (to produce the product) and the output (the product to be used or marketed) of the industry led to the identification of gaps or in-efficiencies where national industrial policy (NIP) could take an active role to address the challenges that can transform the sugar industry. Cross-cutting both the input/output side of the sugar based industries is the basic requirement on logistics (production- tractors, farm implements, heavy equipment, tools, equipment, machines (precision tools/equipment), processingmills part, equipment, hauling of canes/sugar- trucks , car/vehicles) . As an agro-based industries, the sugar industry is machine-equipment (basic and precision equipment) intensive (Fig. 2).On the cane production (input) side, “industrial” products are necessary inputs i.e. machines – tractors, to increase labor productivity thus, allowing for higher wages. Machines are labor productivity enhancing devices. On top of quantity is quality, which in turn , affects crop productivity. For instance, deep plowing cannot be achieved by using small hand tractor, or carabao pulled plows. The hard clays and sugarcane stumps make it impossible for carabao pulled plows to slice the solum. As shown in the earlier estimate, a P5M tractor + implement will absorb much of the sugar yield for debt service. But why are tractors (cars in the automotive industry) so expensive in the Philippines? It may not be possible to manufacture tractors (the John Deer type) within the next 5 decades. But many of the tractor parts and implements could be manufactured here in the Philippines with the right mix of policies and incentives given to engineers and inventors. Consider the following price escalation of metals:
3 kg high grade metal is needed to manufacture 1 disc harrow.
1 kg high grade metal amounts to P100
3 kg x P100 = P300
1 disc harrow = P3,000 – P4,000
A 120 hp John Deere with complete accessories that weighs 7.9 ton is worth P5 million.
7,000 kg x 700/P300/kg = P700,000 worth of high grade metal
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The value addition for the high grade metal is 7.14 times. We could go on and on for the hauling truck ,hole digger, bulldozer, mechanical cane cutters and cane loaders). One (1) unit of Australian made sugarcane combine in worth P30M. At P22/kg sugar, this is equivalent to 833.3 tons sugar; the yield in 154 ha @ 5.4 tons sugar/ha. Only one sugarcane planter bought one (1) unit of combine in 2011. Thirty (30) units were bought by the Thais. Note that the average farm size in Thailand is only 1.0 ha. They have 1.06 Mha sugarlands and about 1.0 million farmers also. Topography and rainfall restricts the use of large combine in the Philippines besides its labor displacement impact. One (1) combine could harvest what 500 workers could do. Machines should be designed to be adapted to specific situations. What is evident is that the logistic side of production needs to be addressed in crafting NIP. Decent work , productivity, and competitiveness are interrelated (Fig. 2) and are worthier goals. Labor must be productive to be paid decent wage but labor productivity enhancing devices must be given to them. One sugarcane harvester could only cut & load 1.5 tons sugarcane in a day. A driver/operator of combine could harvest 500 tons a day (333 times more). Our sugarcane harvester (eastern Batangas) earn P255/day or 6.375 USD/day (1.5 tons x P170/ton). A sugarcane combine operator is paid about 250 USD/day. The labor cost for harvesting sugarcane in Australia is 2.0 USD/ton (250 USD/ 500 tons = 2 USD/ton ), ours is USD 4.125/ton (200% higher ). Many Australian sugarcane planters drive their own combine which makes harvesting as non-cash or unpaid costs in the costs streams. The labor cost per kg sugar in the Philippines is 4.72 US c/kg which 3.147times more expensive than Australian sugar. Of course, the Filipino harvesting needs only a 7.5-dollar worth of Kampilan (the bolo-specifically designed for cutting canes) while an Australian combine harvests is using a USD 750,000 worth of equipment. The estimates are shown below… Australia :1 ton cane = 130 kg sugar , 2 USD/130 = 1.5 c/kg. The cost of labor per kg sugar is 1.5 US c/kg. The labor cost of harvesting in Philippines 4.25 USD/ton. (P170/ton P40/1 USD = 4.25 USD/ton). 1 ton cane = 90 kg sugar = 4.25 USD/90 kg = 4.72 US c/kg sugar
Decent work is almost synonymous to decent pay (high pay). One Japanese claimed, Filipino workers should be productive to be paid high. There is no disagreement except “how he could do this using bare hands?”This relates to the “hardware” component of production which we dream about in the Philippines so our workers may be productive, competitive and paid a decent wage. The productivity side is more complex to decipher. Australian canes are sweeter (13% sugar recovery, national average) because of weather factor. It is cool, sunny and almost dry at harvesting time. The optimum environmental requirements for sugarcane ripening are adequately met. It is equally important to add that their canes are milled within 24 hours after cutting, thus, no sugar inversion losses occur. Road infrastructures are well-developed. (Philippines trucks are lining up in mill yards and wait up to 6-7 days before canes are unloaded, crushed and processed). Australian mill capacities are large so their milling duration is shorter (4 months, 6-7 months in the Philippines and other mill mill canes up to 11 months). Harvesting and crop establishment are interrelated. The fundamentals of sugarcane agronomy our followed to the book i.e. right timing of planting and synchronized harvesting, mechanized planting , balance fertilizer application, recommended location-adapted variety. Or , their canes will not be milled. This relates to the “software” part of production technology. Australian sugarcane planters followed strictly the technological guide provided by their R/D personnels who provide technical assistance in soil analysis, weather forecast, amount of fertilizer to be applied, best adapted variety for their location, correct
22
maturity of canes, at harvest. If the sugarcane planter planted different variety other than what is prescribed, the canes will not be milled. The software part of production (including “hardware” part) is related to R/D. The research intensity of sugarcane in Australia is greater than 1% (more than what the UNEP prescribes). The research intensity (RI) for sugarcane is only 0.16% (RI = 0.16% vs RI = 1.5% Australia). The national average is 0.12 (Saloma, 2012). National Industry Policy (NIP) must not concern only on the output or product of scientific investigation (research) or technological innovation (machines, more efficient process technology like continuous fermentation vs. batch fermentation). NIP must also be concerned on those who perform scientific investigation (researches) and produce creative / unique technology that enhance productivity. The Philippines has low research intensity (RI) which also means low pay for our S/T personnels. Thus, many of our S/T personnels are migrating overseas to earn decent pay! NIP should look into the S/T manpower requirement of the country 1) Firstly, it must look for ways and means to arrest the mass exodus of our S&T personnels. As reported by Bureau of Labor and Employment Statistics (BLES), the S&T personnels leaving the country rose from 9,877 in 1998 to 24,502 in 2009 (2.48 x higher) (PDI, July 7, 2012). The S&T manpower includes physicists, chemists, mathematicians, statistician, computer professionals, engineers, life science professionals, health professionals, nurses and midwives. As a percentage of OFWs, the S&T personnel rose from 4.5% in 1998 to 7.4% in 2009. About 219,724 Filipinos left in 1998 and increased to 331,752 in 2009. A brief survey of the researcher density and Gross Expenditure for R & D (GERD) is in order. The US government spent USD 133.78B or 2.7% of their GDP on scientific research. While 60% of this amount was spent for defense R & D, the balance (USD 53B) was the largest R&D spent in all countries (Table 5). US R&D budget for non-defense related was 40%. The total (USD 133.78B) was 315 times higher than our budget in 2012 (P1.7 trillion) (Nature (2007) as cited by Saloma 2011). GERD for the Philippines in 2003 was only 0.12% which was way below of Thailand, Malaysia (Saloma, 2011). Table 5.Gross Expenditure for R&D and research population density of various countries. Country Amount (USD) % of GDD USA 133.78 2.7 OECD (30 countries) 771.50 2.25 Sweden n.d 3.5 South Korea n.d 3.0 Finland n.d 3.0 Japan n.d 3.0 Philippines 0.051* 0.12 n.d- no data cited in Saloma 2011. *.0012 x P1.7 trillion/P40 = 0.051 USD The despairingly low GERD can also be been in the research population density. Finland has the highest in world @ 16 per 1000, followed by Iceland, Japan, Singapore, Taiwan at 12, 6, 5, 4, respectively. Philippines has only 1 per 7,978 Filipinos or 0.125 researcher per 1000 (But we cannot partition that way!). A doctoral degree does not provide assurance on the improved competence, creativity and innovativeness of a person. But it is also important to look at the data. In Germany, there is 1 PhD per 3,316, US 1 PhD per 6,533. The Philippines has 1 PhD per 88,000. In 2003, we have only 1,374 PhD’s. We should have 25,000PhD to equal Germany or 12,000 PhD to equal US.( Our PhD’s are only 10% of the number of PhD’s in of US or 5% if Germany is the basis). Meanwhile, more than 1000 passed the BAR exam every year while less than 100 obtain PhDs in Applied Sciences, Mathematics and Physics .
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Table 5 . Number of researchers/ PhDs Country Researcher/1000 Finland 16 per 1,000 Ireland 12 per 1,000 Japan 6 per 1,000 Singapore 5 per 1,000 Taiwan 4 per 1,000 Philippines 1 per 7,978 No.of PhD Germany 1 PhD per 3,316 US 1 PhD per 6,533 Philippines 1 PhD per 88,000 1,374 PhD in 2003 *Philippine need 25,000 PhD to equal Germany and 12,000 PhD to equal US.*Extrapolated from the data (Phil. Population in 2003 was 87.9 M. Source: Compendium of S&T Statistics, DOST (June 2007) as cited by Saloma.
The research intensity (RI = R&D funds over gross value added to the crop) follow almost same trend for the countries GERD. RI for rice is 0.20% while 0.16% for sugarcane (Mendoza, 2012 own estimate). A sugar industry leader once said “Soon the Philippines will be importing sugarcane agronomists, plant pathologists, and plant breeder from Thailand, Malaysia or Indonesia. To address this, the Sugar Regulatory Administration (SRA) is now sponsoring scholarship program to attract bright students to do research in sugarcane starting 2013. The Department of Science and Technology (DOST) is offering scholarship but the yearly budget is not fully utilized. Reason: No enough number of applicants besides applicants choice are the common disciplines but not for difficult mathematical/physical sciences. The challenges do not end there? Why are so many leaving after finishing their contracts or services? The rationalization program and the so-called atrition law inhibits government agencies to hire R&D personnels. To go around government rulings, R/D personnel are hired on a contractual basis. Lack of security + low pay are demoralizing our S/T personnels. In PHILRICE, 3 out of 4 of their staff (who have mostly graduate degrees-MS/ PhDs ) are on contractual services. Some of them are on this status for the last 10-15 years. Yet, they are the direct R/D personnels who are expected to make the country selfsufficient in rice. Lack of security of tenure and low pay are demoralizing our S/T personnels.
24 Input/ Production
National Industrial Policy (NIP)
Farm/cane growing Logistics (tools, machineries, equipment Input supplies (fert. Chem.) oil
Goal:
Mills/ cane growing Mill parts Instruments Fuel/ bunker oil electricity
Decent Work
Productivity
Products
Sugar
Refined Brown Sugar Sucrochemicals
Competitive
By-Products
Molasses ethanol Bagasse + Sugarcane tops bioplastics Electricity (Cogen)
Output/ Products – by products Fig. 2. The National Industrial Policy Supportive to the goal of decent work productivity and competitiveness in the sugar industry.
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**The major portion of this paper was drawn from the earlier paper written by the author titled “The Philippine Sugar Industry : The Role of National Industrial Policy in Improving Productivity and Competitivenes ” which was initiated by PELSPI (Philippine Employees - Labor Social Partnerships , Inc., NUBE Union Office, PNB Compound, Araneta Center, Cubao, Quezon City ) under its project study on ‘ National Study/Road mapping for
the Philippine government Industrial Policy prescriptions’. PELSPI is
chaired by Ex-Sen. Wigberto Tanada.
References
Amarra , Archie B. 2015.Interdependency of Bioethanol and Sugarcane Industry: The Way Forward.PPT discussed during Philippine International Biomass Conference Widus Hotel, Clark, Angeles City, Pampanga17 June 2015. Delos Santos, D and T.C. Mendoza. 2002. Determinants of Sugarcane yield in Agrarian Reform Communities in Negros Occidental. Philippines. Phil. Agric’l. Scientist. 85(2), 114-121. Dy ,Rolando.2012. The sugar industry under AFTA in 2015. http://www.bworldonline.com/content.php?section=Opinion&title=The-sugar-industry-under-AFTA-in2015&id=68332#sthash.xt3qnKN7.dpuf. Accessed april 29,2013 Manigbas, N. and TC Mendoza. 2011.Morpho-physiological characters associated with GxE in sugarcane.VDM Verlag Dr. Müller e.K. ISBN 978-3-639-22123-7, paperback, 156 Pages
Mendoza, T.C. 2007. Energetics of Ethanol Production from Sugarcane and its Implications. Asian Life Science Journal. 16(2):115-136 production Mendoza TC.2011.Challenges agriculture during the administration of President Gloria Macapagal Aroyo.Paper presented during the public lecture series entitled “UP Assessment of the Presidency and Administration of President Gloria Macapagal Arroyo (2001-2010)” held at National College of Public Administration and Governance, University of the Philippines Diliman, Quezon City on 18 November 2011. MENDOZA, T.C. 1993a. Assessment of Sugar Yield Trends in the Philippines. Phil. Agric 76(2). April-June 1993. MENDOZA, T.C. 1993b. An Analysis of Philippines Sugarcane Breeding Program. Some Insights and Recommendations. Phil. Agric. 76(2) April-June 1993.
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MENDOZA, T.C., R. SAMSON and T. HELWIG. 2003. Evaluating the Many Benefits of Sugarcane Trash Farming Systems. Phil. Journal of Crop Science. 27(1), 43-51.
Mendoza TC and R Demafelis et al .2015. The Carbon footprint of Sugar Production fro sugarcane in the Philippines.Chapter 20.The Carbon Footprint Handbook".In Press. Dr Subramanian Senthilkannan Muthu, Book Series Editor -http://www.springer.com/series/1334 New Feature, “Asia on The Rice,” Nature 467 p. 885 (21 June 2007) as cited by Saloma C (2012) PonnarongPrasertsri.2012.Thailandsugarproduction.Semi-AnnualReport. http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Sugar%20Semi-annual_Bangkok_Thailand_9-272011.pdf. Accessed April 29,2013 Rapera C.L, T.C. Mendoza and Z.M. Sumalde.2011. Climate change and sustainable agriculturakl development in the Philippines: Policy issues and strategies.UPLB-CEM Policy paper Series No.3. 61 p. Rosario EL, E.P. Paningbatan, A. Gerwin, P. Dionora. 1992. Study on the Causal Factors of Declining Sugarcane Quality in the La Carlota Mill District. Proceedings of the 39th Annual Convention of PHILSUTECH, Bacolod Convention Plaza Hotel, Bacolod City. p 168-184 Saloma C.2011.Science, Technology and the PGMA Presidency. Paper presented during the public lecture series entitled “UP Assessment of the Presidency and Administration of President Gloria Macapagal Arroyo (2001-2010)” held at National College of Public Administration and Governance, University of the Philippines Diliman, Quezon City on November 2011.
Samson E. and T.C. Mendoza. 2007. Application of Total Quality Management in Sugarcane Production .The Phil. J of Crop Science,32(1)59-75. Zabaleta JM.199. Will the Phil. Revert to its net sugar exporter status? http://www.fao.org/docrep/005/X0513E/x0513e17.htm . Accessed Jan 2 2013 The Nation.2010.Strong baht affects sugar cane prices.http://www.nationmultimedia.com/home/2010/10/11/ Compendium of S&T Statistics, DOST (June 2007)
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End Note No. 1 Pole vaulting. Do the planters involved earn more? Given: VMC gives 2.20 Lkg/TC,Hauling subsidy: P320/ton Iloilo Bacolod VMC,RORO = PhP6,400 (round trip) Added diesel = 100 li x P42/li = P4,200 (round trip) Truckload = 20 tons Additional Lkg for sugarcane milled to VMC = 0.5 Lkg (2.2 – 1.7 Lkg/TC) Per Truck Added Revenue 0.5 Lkg/TC x 20= (10 Lkg)(0.65)(P1,230/Lkg) = P7,930 Hauling subsidy= P320/TC x 20 = P6,400 Total
= P14, 330
Per Truck Added Costs Hauling:
100 li x P42/li = P4,200
Food allowance of the driver Total
= 1,000
= P5,200
Added Net Revenue
= P14,300 – P5,200
= P9,130
Endnote No. 3. Sugar yields as per the sugar industry road map (by 2016) Yield targets
= from 57 TC/ha 75 TC/ha = 1.18 Lkg/TC 2.1 Lkg/TC
Area expansion = from 422,384 to 465,000 ha Yield Increase = 75 TC/ha x 2.1 Lkg/TC x 50 kg/Lkg = 7.875 TS/ha (ton sugar per ha) Total Sugar
= 7.875/ha x 465,000 ha = 3.66 million tons sugar
End Note No. 2 Bioplastics Bioplastics are produced from cellulosic materials like baggase or any other cellulosic crop residues or weeds ( Saccharum spontaneum, talahib, cogon, etc). The first manmade plastic was developed in 1850s is an organic material derived from cellulose called parkesine. The discovery of oil and the lower costs of processing polymers from petroleum shifted altogether the use of cellulosic material to produce plastic. High costs and access difficulties , oil price increase may cause the rebirth of bioplastics. The benefits of bioplastics are as follows:
Can replace many harmful conventional plastics
Biodegradable – can be composted into biofertilizer
Can be made into variety of biomass (1 year renewable or less as in rice & corn residues)
Can contribute to healthier rural/urban environment
Reference:
Road Map of the Philippine Sugar Industry (Power Pt Presentation, SRA, Nov. 2012).
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End Note No.2. Diversification: The Key to Economic Prosperity among our ARB’s in sugarlands*
Why Diversify? 1. 2. family.
Sugarcane is a 12-16 month crop, income wise. With small farm size, 0.5-2.0 ha per ARB , income from sugarcane can not sustain the ARB’s
>>Income from sugarcane is not sufficient even for well managed canes which could earn as much as P63 000/ha @ 80-100 TC/Ha, 2.0 LKg/ha P1,400/kg >>>ARB’s manage canes yield ranges 40-60 TC/Ha P20-30,000/ha
Implications: 1. ARB’s can manage their canes well and they will harvest 80-100 TC/ha. If they will be sourcing their income from sugarcane alone, they will just be having an income of P173/day. What does it takes to get a yield of 80-100 TC/Ha. The ARB needs to spend P67,000/ha initially for adequate land preparation, fertilizer application etc. 2. The high cash capital requirement of sugarcane production to yield high explain why ARBsmanaged canes yield low @ 40-60 TC/Ha. What needs to be done to improve ARB’s economic well-being 1. 2. 3.
Increase sugarcane yield up to 90-100 TC/Ha Grow other crops or raise animals Have other income source or non-farm livelihood sources especially during sugarcane off-season.
A.
Increasing Sugarland Productivity and Income by:
1. Adequate land preparation (120 Hp tractors) 2. Timely crop establishment (planting) 3. Use of location adapted variety 4. Sufficient fertilizer application (1.5 Kg N 0.5 kg P 1.5 kg K2O per TC) ARB’s needs to form group,SRA+DAR is promoting group farming. That group should be transformed into multipurpose cooperative B.
Growing other crops or raising animals
1.Intercropping short/early maturing legume crops during the first 3 months growth of sugarcane (mungbean, cowpea) 2. Allocating specific area i.e. 500-1000 m2 to continuously grow crops-Vegetables, fruit trees; 3.Re-design sugarcane monoculture into polycropping systems OPTIONS 1. Plant fruit trees, coconut, banana between property lines, farm boundaries, or, for every 20 rows of sugarcane Benefits: a) Fruit/wood trees serves as firebreak b) Higher income than sugarcane when they bear fruits
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Projections: 200 bananas/ha (saba, latundan) 300 bunch/year x 10 kg/bunch x P20/kg =
P90,000
50 jackfruit x 5 fruits x 5 kg/fruit x P20/kg =
P25,000
50 coconut x 100 nuts/year x P15/nut = TOTAL @ 50% realization
P75,000 P190,000 P95,000
100 Thailand lanzones x 100 kg/tree x P200/kg = P2M (12-15th year, Dr. Leo Namuco) Wood trees for lumber (Narra, mahogany, eucalyptus) 50 mahogany/ eucalyptus (20 years) x P10,000/tree = P500,000 P20,000/year 50 narra (30 years) x P20,000/table = P1,000,000 = P33,000/year 1 tree 2 narra table x P50,000 table = P100,000/tree 2. Raise animals Native chicken: 100 hen x 150 eggs x P5/egg = P75,000 2 dairy carabao (1 calving/year, staggard) 5 li/day x P100/li x 240 day = 120,000 (8 li/day optimum yield) Carabao manure, the best manure for organic fertilizer
Increasing Income further through the Value Chain >>>>>> 1.
Sugarcane cane for vinegar/ wine
Cane vinegar: 1000 kg cane 400 li juice x P50/li = P20,000/ton cane @ 70 TC/Ha x P20,000 = P1.4 M/ha Basi : 1000 kg cane 400 li juice x P100/li = P40,000/ha @ 70 TC/HGa x P40,000 = P2.8 M/ha 2. Sugarcane for muscovado sugar Current price of “tinaklub” muscovado in coco shell is P50/kg while brown sugar is P28/kg 1 ton cane 60/kg x P60/kg = P3,600 per ton cane in muscovado sugar (use family labor) = P1,800 net of expenses (potential yield in 70 kg/ ton cane) Cost/ kg centrifugal sugar =
P12
30
Price/kg
=
Net Price
P28
=
P16/kg x .65/ton = P1,040 per ton in centrifugal sugar
(2 LKg/TC x .65 – planter share)
Increase in revenue from sugar to muscovado is 1.73 times higher or @ 70 TC/Ha x 1,800 = P126,000/ha 3.
Carabao milk >>>>> pastillas
4.
Native chicken egg >>>>binalot rice
5.
Banana saba >>>> banana cake
Concluding Remarks: 1.
There are lots of opportunities for our ARBs in sugarlands, coconut ,rice lands.
2. They are better off than their urban counterpart if the lands will be properly used. If primary agricultural products are processed into higher value products, the increase in income is enormous.
