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Philippine domestic sugar prices fall for first time in over 14 months due to imports

Singapore — The composite raw sugar ex-mill price in the Philippines dropped for the first time in over 14 months in half-monthly cycles, by 3 Pesos/lkg ($1.12/mt) in second-half July to Pesos 1,950.88/lkg, latest data released by the country's Sugar Regulatory Administration showed.

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The price declined in H2 July after imports started to flow in for the first time since 2015 amid supply tightness and surging prices in the domestic market. Composite raw sugar ex-mill prices surged by 51.14% between the start of the year and H2 July, SRA data showed.

To combat the tightness in the domestic market and ease prices, the SRA in June allowed 200,000 mt of sugar imports for the first time in two years; 100,000 mt allocated for bottler's grade refined sugar to be consumed by bottling companies like Coca-Cola FEMSA Philippines (Coke) and Pepsi-Cola Products Philippines, Inc, and the other half split equally between raw and refined sugar imports.

"At least 80-90% of the imports are booked into the Philippines and should mainly be exported from Thailand," an Asian trader said.

The average of Platts refined sugar container spot prices in June and July was $357.87/mt FOB Thailand, making the landed price of refined sugar in the Philippines around $367.87/mt, with freight between Thailand and the Philippines at $10/mt, S&P Global Platts data showed. This is less than a third of the domestic retail price of refined sugar at around Pesos 3,250/lkg ($1,216.48/mt), market sources said.

The Philippines has been grappling with high domestic sugar prices since the Tax Reform for Acceleration and Inclusion or TRAIN bill introduced taxes on sweetened beverages from January 1 this year.

The bill imposed a Pesos 6/liter ($0.12/liter) tax on drinks containing calorific or non-calorific sweeteners and a Pesos 12/liter tax on drinks containing high-fructose corn syrup, or a combination of both.

In response, major beverage companies in the Philippines opted to switch HFCS with sugar in their production process, industry sources said.

The new policy was expected to increase sugar demand at the expense of high fructose corn syrup, according to S&P Global Platts Analytics. Demand was estimated to increase by 300,000 mt from last season to 2.42 million mt for the 2017-18 (October-September) season, Platts Analytics data showed.

Adding to the tightness, production was estimated to fall by 205,000 mt from last season to 2.3 million mt for the 2017-18 season, the data showed.

Composite raw sugar ex-mill prices published by the Philippines' SRA is an average of the ex-mill prices of US Quota 'A' sugar prices, Domestic 'B' sugar prices and World 'D' sugar prices.

-- Srijan Kanoi,

-- Edited by Wendy Wells,