The Philippine Sugarcane “Challenges & Opportunities” Industry “Challenges & Opportunities” Bioethanol Cane Farms Sugar Mill Sugar Regulatory Administration Department of Agriculture Philippines Presenters: Jose Rojo G. Alisla Rosemarie S. Gumera Sugar Asia Conference Bangkok, Thailand May 16-17, 2012

Profile of the Philippine Sugarcane Industry Crop Year 2011-2012 Area Planted 420,000 Hectares No. Farmers 62,000 No. of Operating Sugar Mills -Total Milling Capacity 29 185,000 Tons Cane / Day No. of Operating Sugar Refineries -Total Refining Capacity 14 8,000 MT/Day No. of Bioethanol Distilleries -Total Annual Rated Capacity 4 133 million liters

MAP OF PHILIPPINE SUGAR MILLS & BIOETHANOL DISTILLERIES Legend CAGAYAN Green Future Innovations CAGAYAN / ISABELA 11,000 HECTARES Bioethanol Distilleries Sugar mills Mills with annexed refinery Major sugar ports Bioethanol production areas Bioethanol target areas Pampanga Bioenergy 7,000 HECTARES LUZON (7 mills + 4 refineries + 1 distillery) TARLAC N PAMPANGA Cavite Biofuels 7,000 HECTARES MANILA W E CAVITE BATANGAS Batangas Sugar CAMARINES SUR S VISAYAS (18 mills + 7 refineries + 3 distilleries) MASBATE SAMAR NEGROS OCCIDENTAL PANAY CAPIZ Canlaon Alcogreen 5,000 HECTARES ILOILO Lopez Sa LEYTE CEBU NEGROS SAN CARLOS 5,000 HECTARES BOHOL SURIGAO DEL NORTE PALAWAN NEGROS ORIENTAL Tolong AGUSAN DEL NORTE SURIGAO DEL SUR MISAMIS OCCIDENTAL BUKIDNON LANAO DEL NORTE MINDANAO (4 mills + 3 refineries) ZAMBOANGA DEL NORTE MISAMIS ORIENTAL NORTH COTABATO ZAMBOANGA DEL SUR Davao SOUTH COTABATO DAVAO DEL SUR

Distribution of Philippine Cane Areas, CY 2011-2012 17,000 has. Total Cane Area – 420,000 hectares

24% 18 % 12 % 16 % 15 % 15 % Farm Sizes, Hectares

Philippine Sugarcane Areas for the Past 10 Crop Years

Philippine Cane & Sugar Production for the Past 10 Crop Years Million MT Crop Years

Philippine Farm Productivity for the Past 10 Crop Years

Philippine Sugar Production & Trade for the Past 10 Crop Years

HISTORICAL PHILIPPINE RAW SUGAR COMPOSITE PRICES Crop Year Pesos Per 50-kilo bag Peso-US $ Exchange Rate USCents/lb 2011-2012* 1,404 43.15 29.58 2010-2011 1,864 43.46 38.99 2009-2010 1,664 46.21 32.74 2008-2009 945 47.93 17.92 2007-2008 1,057 43.10 22.29 2006-2007 844 48.17 15.93 2005-2006 978 53.01 16.77 2004-2005 664 55.50 10.88 2003-2004 710 55.68 11.59 2002-2003 843 53.46 14.34 * As of April 2012

Bioethanol Production, Liters Year TOTAL Production (Million Liters) Mandated Bioethanol Blend Mandated Volume 2008 0.368 Voluntary None 2009 23.11 5 % 208 2010 9.89 219 2011 4.14 10 % 461 2012* 12.00 (estimates as of May 2012) 486 In 2012, around 486 million liters bioethanol is required under the 10% mandated blend, however, only 4 distilleries are operational with a combined annual rated capacity of 133 million liters.

Power Situation in the Philippines 2010 Power Generation by Plant Type, GWh Gross Power = 67,743 GWh

Total Electricity Sales in the Philippines, 2009 vs. 2010 GWh

2010 Installed and Dependable Capacity, Philippines MW

CHALLENGES Sugar Tariff Schedules and Implications Maintaining Profitability in the Philippine Sugarcane Industry Performance of Philippine Sugar Mills and Deterrents to Mill Improvements Implementation of the Biofuels and Renewable Energy Laws

Implications: Sugar Tariff Schedules and Implications AFTA – CEPT Tariff Schedule: - 38 % - 28 % - 18 % - 10 % - 5 % Implications: Entry of imported sugar would threaten the livelihood of the 62,000 farmers and 600,000 workers of the Philippine sugarcane industry Entry of imported sugar will push downwards the millsite price of locally- produced sugar

Maintaining Profitability in the Philippine Sugarcane Industry Fragmented farms due to the Comprehensive Agrarian Reform Law Small farms have low farm productivities Small farmers have no financial capability in procuring the necessary farm inputs Lacks infrastructure support from government

Performance of Philippine Sugar Mills and Deterrents to Mill Improvements Less efficient sugar mills, low capacities Majority of Philippine mills need to be rehabilitated and upgraded Lack of financial package from government financing institutions

Implementation of the Biofuels and Renewable Energy Laws Uncertainty in the buying price of bioethanol – how successful is the implementation of the price index of locally-produced bioethanol Feed-in-tariff rate for biomass is still pending with the Philippine Energy Regulatory Commission

OPPORTUNITIES Prospects for Cane Expansion Areas Access to Japan Sugar Market thru PJEPA Creating Greater Value for Sugarcane Bioethanol Production Power Cogeneration Increased Farm Mechanization Due to Labor Supply Shortage Sustaining Domestic Requirement and Maintaining World and US Quota Exports

Prospects for Cane Expansion Areas Most Philippine sugar mills are underutilized due to the lack of cane supply Development of expansion areas for sugarcane to supply the feedstocks for bioethanol fuel Access to Japan Sugar Market thru PJEPA Proposal of the Philippine gov’t under the Phil.-Japan Economic Partnership Agreement (PJEPA) for a TRQ of 150,000 MT raw cane sugar with an in-quota rate of 4.415 yen per kilo and 1,000 MT of muscovado sugar with an in-quota rate of 17.65 yen per kilo.

Creating Greater Value for Sugarcane Product diversification or development of alternative or high-value products Production of organic sugar Turning a community of small cane farmers into an agribusiness enterprise Bioethanol Production Thirteen more distilleries with an annual capacity of 30 million liters are required to meet the volume requirement of the 10 % mandate of bioethanol blend

Power Cogeneration Existing power generating capacity of all the sugar mills in the Philippines is 200 megawatts; Given the right investment environment, the boilers and power generators of such mills can be upgraded up to 600 megawatts making available 400 megawatts for power cogeneration The Philippines is currently experiencing power shortages and the power generated by the sugar mills could help solve the country’s problem on power deficit

Increased Farm Mechanization Due to Labor Supply Shortage Farm laborers in the Philippines became scarce and the new generation are no longer inclined in farming but preferred to work overseas The shortage of farm labor triggered the shift to farm mechanization in the Philippines

Sustaining Domestic Requirement and Maintaining World and US Quota Exports The Philippines has to be a net exporter of sugar by 2015 in order to be in the offensive move rather than be flooded with imported sugar More opportunities for investment in mill modernization, infrastructure and farm and equipment are seen to flourish in the Philippines given the need to be competitive in world sugar production

Thank You Website : www.sra.gov.ph Email : srahead@sra.gov.ph info@sra.gov.ph Tel. No. : (632) 929-3633 (632) 455-2135