Old Dogs Learning New Tricks!
(Sustaining the Growth of the Philippine Sugarcane Industry)
Delivered at the 45th Council Meeting at Montego Bay, Jamaica
By Ma. Regina B. Martin
Administrator, Sugar Regulatory Administration
During the 33rd ISO Council Meeting in 2009, my predecessor delivered to this Council the Philippine National Policy on Sugar with a question - and a challenge - "Can Old Dogs Learn New Tricks?". I stand proud before you today to say that: “Yes, the Philippine sugarcane industry can!”
Let me expound that statement by starting to brief you on the Current Industry Profile, versus that of Year 2009.
· Area planted - 420,000 hectares (vs 392,000 hectares in 2009) or 7.1% increase in 5 years
· Number of farmers - 62,000 (vs 55,740 or 29% increase) with more than 90% having farms of 10 hectares and below, because of agrarian reform
· Sugar Production - 2.42 mmt (vs 2.1 mmt or 15% increase)
· Direct Dependents - 700,000 persons (vs 600,000 persons or 16.7% increase)
· Average Consumption per year - 2.1 mmt for past 3 years (vs 1.95 mmt or 7.7% increase)
· Population - 100 million (vs 90 million or 11% increase)
· Number of mills: 28 raw mills with 202,500 MT/day capacity (vs 28 mills with 185,000 MT/day or 9.5% increase)
· Refineries - 14 refineries with 8,000 MT/day capacity (vs 11 refineries)
· Bioethanol plants - 6 distilleries (vs 2 distilleries)
· Co-generation plants - 5 biomass power plants (vs 0 biomass-based power plant)
The Philippine sugarcane industry has transformed into a more resilient industry through structural and policy adjustments:
1. A Coherent Old Dog ... A well-organized Industry
The sugarcane industry is considered the most organized among the Philippine agricultural crops. The Government through the Sugar Board provides the policy direction. The sugarcane farmers are organized into associations at the mill district level, and further grouped into federations at the national level. Most of the mills are members of the Philippine Sugar Millers Association, and the refineries are members of the Philippine Association of Sugar Refiners. The sugarcane planter and mill federations are part of the Sugar Alliance of the Philippines at the national level, which provides advice to the Administrator of the Sugar Regulatory Administration. We have other institutions with specific focus: Philsurin for Research and Development; Sugar Master Plan Foundation for program management; Sugar Industry Foundation for socio-economic programs, Philippine Sugar Corporation for financing, Mill District Development Councils providing farm productivity and cost reduction programs, and the various foundations delivering socio-economic programs to farmers at the district level. All these have made the industry a strong socio-political group.
2. Our Show . . . Diversification
We have shifted our focus from sugar as a product, into sugarcane as a raw material from which a multitude of products can be derived. Sugar will continue to be our major product. And we shall be producing more than our local demand which has increased by 10% in the last three years. Our excess must fill up our commitment for the US quota and a minimum of 150,000 mt. annual exports to the rest of the world. Thus, we target to produce 2.5 million mt raw sugar by next year. Ethanol will be our second product for which we target to produce 400 million liters by Year 2020. And to complete our three-legged model, our sugar mills will produce excess electricity of about 200MW for sale to the grid.
In addition, we will research on developing other sugarcane-based products, starting with specialty sugar. We shall adopt technologies utilizing the cane juice and other by-products of sugar production in creating new marketable goods.
3. Our New Tricks . . . Innovations
a. Block Farming
Block Farming is our flagship program. We are consolidating small farms into block farms of 30-50 hectares to achieve farm efficiency and economies of scale. We are introducing professional farm managers, service providers for equipment, financing, and other aspects of sugarcane farming. We have tapped public and private financing to support the block farms. In just a year, we have seen the increase in productivity of our pilot areas by no less than 10%. We are expanding our coverage so that we can return half of our farms into efficient block farms.
b. Engaging with other government agencies
As a well-organized industry, the Sugar Regulatory Administration has, for the longest time, been connected directly to the Office of the Philippine President. While it has its advantages, we have created an impression that we don't need the other agencies of government. Thus, in the past three years, we engaged with other agencies, advocate our programs and infrastructure needs as an industry and seek their assistance and services. The agrarian reform agency has been our partner in the block farming program. The irrigation agency has now put sugarcane as a priority crop. The road agency has accepted our priority farm-to-mill roads for improvement. Others have committed to help us, creating a synergy in the diversification and productivity improvement efforts of the sugarcane industry. We shall continue this engagement to create a strong public-private partnership.
c. Special Governing Boards
Our Biofuels Law of 2006 and Renewable Energy Law of 2008 have mandated the creation of governing boards to work on the detailed guidelines of the legal and policy framework and oversee the implementation of the Biofuels and the Renewable Energy Programs wherein the sugarcane industry is a major player.
The National Biofuel Board (NBB), of which I sit as Vice-Chair for Ethanol concerns, has innovated the reference price and crafted the rules to ensure that locally-produced ethanol are bought first by the oil companies before they can import the balance volume to fulfill the mandated 10% blend. We have produced about 71 million liters ethanol last year, more than double than the previous year, to meet 20% of our mandated volume. We imported the required 80%. But we will surely reduce that percentage this year with the addition of 2 distilleries pushing production to the 100 million liters target by year end. We will have additional plants in the coming years, bringing our capacity to 400 million annually in year 2020.
The National Renewable Energy Board (NREB) has now actively pushed the development of renewable energy sources. With our feed-in-tariff pegged at P6.63 or $0.15 per kilowatt-hour for power produced from biomass, most of our sugar mills are gearing up to produce excess power from bagasse. We expect to deliver 50 MW power to the grid by year-end from our bagasse-fired plants. And we hope to achieve our target of 200 MW by the end of year 2016. All these efforts under the national biofules and renewable energy programs support the diversification of the sugarcane industry. On this note, I am pleased to inform you that I will hopefully sit as member of the National Renewable Energy Board when I arrive back in the Philippines thus providing us further boost to push our agenda.
d. Discipline in the free market
The Philippine Sugar market is a free market. What( my)agency does is to ensure that we allocate enough volume for our local needs,(as a priority, before export volumes are given its allocation) .( All of us here who are sugar exporters do this.) In the Philippines, we classify our sugar production through the quedan system. (And ) we impose our rules on the mills, the traders, and all our stakeholders. It is in the transparent and fair imposition of the rules that the market will react positively, as we have seen this over the past years. We will continue to tread this path in the years to come.
e. Industry Response to the ASEAN Economic Community (AEC)
We viewed the AEC as an opportunity to improve ourselves. We need to be competitive with our ASEAN friends. We must produce sugar at a cost lower than the projected landed cost of imported sugar. To achieve this, our main strategy is to increase productivity and reduce our cost of production. We have hired 100 additional agriculturists to assist our small farmers to adopt good farming technologies. We continue our variety improvement program. We research on potential technologies. We are now building our information database for each sugarcane field, starting with mapping our entire sugarcane areas, to lay the backbone for an "intelligent system" in our crop estimate system and extension services.
f. Private sector development and engagements
Consolidation of sugar mill ownership has now saturated the Philippine Sugar Industry. Half of our 28 mills are owned by just 6 companies. Given the good prospects, further consolidation is expected. In fact, there are indications that control of the supply chain is pushing the indirect participation of the mills in the farms. As these big companies compete, new innovations on reducing costs are expected.
Another significant development is the entry of new players in the industry. The big businesses in the Philippines and foreign investors are knocking at the industry doors to invest in either bioethanol or power cogeneration, or both. There are young professional farm managers expanding their operations in close partnership with the mills. The issue of land ownership is taking a back seat in the strive to make the land more productive. . . More profitable!
Given these and a lot more small but meaningful details that I will not have the time to expound now, the Philippine sugarcane industry has indeed "learned new tricks" in the short span of 5 years. We are taking a serious look into how we do things. We re-engineer, re-organize, and reform any aspect in the whole value chain, from cane planting to marketing, from farm planning and synchronization of milling with harvesting operations, towards achieving our goal of becoming globally-competitive and contributing to our nation's inclusive growth.
Let me close by expressing our gratitude to the ISO for showing us the way to "learn new tricks". Our participation in the ISO seminars, workshops, and exchange of ideas has and will continue to give us confidence in facing the future. My special thanks to Dr. Peter Baron for his unselfish effort and patience in showing us the way.
Indeed, we still have "old dogs" but they have “learned new tricks”!
More importantly, we have many "new dogs" and they “invent new tricks"!
Maraming Salamat at Mabuhay Tayong Lahat!