SUGARCANE ROADMAP 2020 CY 2014-2015 to 2019-2020 Version SEPTEMBER 2015 Sugarcane Roadmap 2020 “A Medium-Term Plan for the Philippine Sugarcane Industry” Released by the Sugar Regulatory Administration (SRA) on September 2015 through the Support and Guidance of the Department of Agriculture (DA) and the Department of Trade and Industry (DTI). Page 2 of 309 ACKNOWLEDGMENT The Sugar Regulatory Administration acknowledges the support of the sugarcane industry stakeholders especially the MDDCs, the services and efforts of those who provided the data, prepared and developed the contents of the “Sugarcane Roadmap 2020” and those who guided and assisted during the stakeholders consultations down to the sugarcane mill district level. Rafael L. Coscolluela DTI Consultant / Facilitator USEC Adrian Cristobal Jr. Undersecretary for Industry Development & Trade Policy Group, DTI Managing Head, BOI USEC Segfredo Serrano Undersecretary of Policy, Planning, Research and Development & Regulations, DA Director Nestor Arcansalin Resource-Based Industries Department, BOI-DTI Dr. Rolando Dy and Ms. Florence Sevilla DA Consultant / Facilitator BOI Secretariat Rosemarie Ilagan Elizabeth Cristina Pahilan Mario Pocholo Orense SRA Secretariat Rosemarie S. Gumera Leilani S. Abacan Digna R. Gonzales Nina Belen Concepcion C. Ruby Magdalena D. Palanca Felina M. Quiambao Alice Maliwat Loida S. Abcede Zenaida E. Tubiera Page 3 of 309 ENDORSEMENT OF SRA TO DA & DTI Page 4 of 309 ENDORSEMENT OF SRA TO DTI ENDORSEMENT OF INDUSTRY GROUP TO DTI & DA Page 5 of 309 Page 6 of 309 Page 7 of 309 TABLE OF CONTENTS OVERVIEW Page 10 ☒ Rationale ☐ Objectives ☐ Area Coverage INDUSTRY SITUATIONER (WHERE ARE WE?) Page 16 ☐ Structure ☐ Performance – National Production and Yield, Key Production Areas ☐ Domestic Prices – Sugar and Bioethanol ☐ Domestic Consumption – Sugar, Bioethanol, Muscovado, Molasses, Mudpress, Bagasse, Bio-organic fertilizer, Boiler ash ☐ Trade (Imports / Exports) – Sugar, Molasses, Bioethanol, Muscovado ☐ Processing Industries – Sugar Mills, Sugar Refineries, Bioethanol Distilleries, Muscovado Mills, Power Generation Plants FARM INCOME ANALYSIS Page 118 ☐ Farm Cash Flows SUPPLY / VALUE CHAIN ANALYSIS Page 128 ☐ Supply Chain Segments and Players – Sugarcane Production, Sugarcane Processing, Trading of Sugarcane Products ☐ Cost Build-up, Value-Added and Margins – Benchmarking Cost Against Thailand, Sugarcane Production Cost, Milling Cost, Refining Cost, Distilling Cost, Supply Chain Cost Build Up & Net Returns ☐ Support Industries, Key Institutions and Programs – Farm Sector, Milling/Refining Sector, Muscovado Sector, Bioethanol Sector, Power Generation Sector ☐ Benchmarking Analysis – Local Benchmarking, Global Benchmarking with Thailand Page 8 of 309 TABLE OF CONTENTS COMPETITIVE ANALYSIS Page 191 ☐ Price Competitiveness MARKET TRENDS AND PROSPECTS Page 195 ☐ Market Trends ☐ Market Prospects ☐ Export Competition SWOT ANALYSIS Page 199 ☐ Strengths ☐ Weaknesses ☐ Opportunities ☐ Threats TARGET SETTING (WHERE DO WE WANT TO GO?) Page 202 ☐ Industry Vision, Mission and Goals STRATEGY – HOW DO WE GET THERE Page 203 ☐ Specific Sectoral Strategies and Interventions IMPLEMENTATION PLANS Page 207 ☐ Mill District Development Plan 2015-2024 ☐ Block Farm Implementation Plan ☐ Medium-Term Plans and Targets ☐ Institutional Development Measures ☐ Productivity Improvement Programs Page 9 of 309 TABLE OF CONTENTS OUTPUTS AND EXPECTED OUTCOMES Page 258 ☐ Production, Area, Sufficiency Level, National Yield ☐ Inclusive Growth Indicators MONITORING AND EVALUATION Page 261 ANNEXES Page 263 ☐ Performance of Block Farm Program ☐ Support Services Rendered to Block Farms ☐ Mill District Maps – Samples only ☐ SRA Action Programs and KRAs ☐ Creation of Sugarcane Industry Development Council ☐ Coverage of Sugarcane Mill Districts LIST OF TABLES Page 302 LIST OF FIGURES Page 308 REFERENCES Page 309 Page 10 of 309 SUGARCANE ROADMAP 2020 “A MEDIUM-TERM PLAN FOR THE PHILIPPINE SUGARCANE INDUSTRY” 1. OVERVIEW 1.1 Rationale Under the Philippine Development Plan (PDP) 2011-2016, the government is mandated to formulate a Comprehensive National Industrial Strategy (CNIS) that will spell out opportunities, coordinate and promote the growth of forward and backward linkages in priority areas and high potential growth sectors, and prepare other industries to attract investments and generate jobs. One identified major strategy is the development and promotion of industry clusters to help achieve the PDP’s vision. In relation to the aforementioned mandate, the Department of Trade and Industry is partnering with the private sector and other agencies in implementing activities including the formulation of Industry Roadmaps to develop industries with large potentials to boost the economy and will generate more jobs in the countryside. The Sugar Regulatory Administration and the Industry players themselves have long recognized the need for a Sugarcane Industry Roadmap, and have in fact formulated various versions over the past 15 years. This new initiative is a fresh collaboration between SRA and DTI-BOI, following other efforts by SRA to partner with the Department of Agriculture, Department of Agrarian Reform, other national Government agencies, GFIs and the private sector. This updated Sugarcane Industry Roadmap is thus formulated to serve as guide in the identification and implementation of appropriate programs and interventions to enable the industry to address the threats and exploit the opportunities of trade liberalization, beginning in year 2015 when tariff on imported sugar will be reduced to 5% and the full integration of the ASEAN Economic Community (AEC) takes effect. With goods and services (including sugar) expected to flow freely within the region, the Philippine sugarcane industry will need to gear up for competition against its neighbors in the AEC. Page 11 of 309 1.2 Objectives Following extensive consultations with industry stakeholders and reviews of previous initiatives including the Action Plan formulated by Task Force PATDAN, the SRA Roadmap of 2010, and the succeeding versions of the Sugar Master Plan formulated by the Sugar Master Plan Foundation, the framers of this Roadmap have endeavored, with official support from the Department of Agriculture and Department of Trade and Industry through the Board of Investments (BOI), to redefine the targets, strategies and needed interventions to achieve the industry’s short, medium and long-term goals. The Roadmap is formulated to generate an overarching plan towards the development of a sustainable and multi-product sugarcane industry which continues to contribute significantly to the national economy. The industry contributed about P87 billion to the Philippine economy in Crop Year 2013-14 from the sales of raw sugar, molasses and bioethanol, from tolling fees on sugar refining and VAT on refined sugar. In addition, it brought in US$ 111.76 million in CY 2013-14 through exports of sugar to the US and world markets. Moreover, the displacement of gasoline with 10% bioethanol derived from sugarcane and molasses also generates savings of foreign currency reserves apart from contributing towards a cleaner and greener environment. Under the scenario spelled out in this roadmap, a more productive and competitive sugarcane industry will increase its contribution, in the medium-term, to about P100 billion through the opening of additional bioethanol plants and production of renewable power as well as other products from sugarcane like specialty sugars, bio- water, bio-plastics and more. The establishment of support industries will likewise contribute significantly to the revenue streams of an expanded sugarcane industry. Page 12 of 309 Figure 1.1. The Conceptual Framework for a Sustainable & Diversified Philippine Sugarcane Industry Page 13 of 309 1.2 Area Coverage Total sugarcane area in crop year 2013-2014 was 423,333 hectares planted in around 20 provinces within the 10 regions of the country. Sugarcane area in crop year 2014-2015 declined to 416,893 hectares for sugar production and 5,982 hectares for bioethanol production in Isabela Mill District, a newly created sugarcane mill district dedicated to bioethanol production. Sugarcane growing areas cover 30 Mill Districts (MDs) – 7 MDs in Luzon (includes Isabela Mill District), 3 MDs in Mindanao, 4 MDs in Panay, 3 MDs in Eastern / Central Visayas, 2 MDs in Negros Oriental and 11 MDs in Negros Occidental. SRA created the Mill District Development Committees (MDDCs) in the mill districts to oversee and implement programs and projects for the development of the sugarcane industry. It is composed of representatives from the mills, planters associations, PHILSURIN and SRA as Secretariat. The MDDCs were transformed into SEC-registered foundations or Mill District Development Council Foundation, Inc. (MDDCFIs) in order to avail of the Sugar ACEF grant in 2001. Hectarage of sugarcane harvested per mill district from crop year 2009-2010 to 2013-2014 are given in Table 1.1. Generally, within the five-crop-year period examined, sugarcane areas harvested were on the uptrend from 385,662 hectares in crop year 2009-2010 to 424,132 hectares in crop year 2012-2013. Figure 1.2 shows the distribution of sugarcane plantations by island in crop year 2013-2014. Negros island shares 53% of the sugarcane production areas, followed by Mindanao with 22% share, Luzon with 14% share, Panay with 7% share and Eastern/Central Visayas with a share of 4%. Figure 1.3 illustrates the trend of sugarcane hectarage for