El Nino May Hurt Sugar Production in the Philippines

By Luzi Ann Javier

Jan. 19 (Bloomberg) -- El Nino, which reduces rainfall in Asia, may curb sugar production in the Philippines, squeezing supply in Southeast Asia’s second-largest exporter if it lasts for five months, a government official said. Raw sugar rose.

“Our output may be lower and we might see tightness in supply” after April, said Aida Ignacio, deputy administrator at the Sugar Regulatory Administration, in a phone interview today. “How low it will go, we still don’t know.”

Lower output may make the Philippines an importer for a second year. Indonesia, Iraq, Egypt, Pakistan and Tanzania are seeking sugar to cool prices, straining global supplies forecast by Czarnikow Group Ltd. to fall short of demand by 13.5 million metric tons in the 2009-2010 season. El Nino can affect agricultural production across parts of Asia and curb rice production in Thailand, the world’s biggest exporter.

“An extended El Nino is bad news,” Coscolluela said in a cell phone text message today, referring to the period from February through June or July. Still, “so far, our new crop is actually looking good,” he said.

The Philippines may buy as much as 150,000 tons of sugar this year, Rafael Coscolluela, the regulatory administrator, said last week. That would be the first purchase for domestic use since 2002, according to Amarra.

Batangas and 20 other provinces experienced a dry spell in the past three months, according to the weather bureau. Batangas has the capacity to produce 160,000 tons a year, about 7 percent of the nation’s forecast output this year, Philippine Sugar Millers Association Executive Director Archie Amarra said today.

‘Significant Influence’

The El Nino weather phenomenon strengthened in December and is forecast to last through June, according to a Jan. 7 U.S. Climate Prediction Center report. “Regardless of its precise peak strength, El Nino is expected to exert significant influence on global weather and climate in the coming months,” it said.

Below-normal rainfall may stunt cane growth in its first four months of development, Amarra said in a phone interview from Negros Island in central Philippines.

Cane needs at least a year to grow in the Philippines and planting takes place all year round, Amarra said today. El Nino may increase the sugar content of mature cane, helping raise yields for crops planted four months before the phenomenon hit the country, he said.

Price Jumps

Raw sugar had its biggest annual gain since 1974 last year. The March-delivery contract jumped as much as 2.1 percent to 28.20 cents a pound on ICE Futures U.S. in New York at 4:56 p.m. Singapore time.

The Philippines may buy sugar as early as April, said Agriculture Secretary Arthur Yap on Jan. 13. Supplies of smuggled sugar have dried up as global prices surge, lifting the use of domestically made sweetener to 2.1 million tons this year from 1.87 million tons last year, Amarra said last week. Output is forecast at 2.16 million tons, he said.

Exports may drop to 143,000 tons in the year that began Sept. 1, the lowest since 2002, after the government ordered a halt in shipments to markets outside the U.S., according to Amarra. The country ships sugar to the U.S. under its import quota system.

The country shipped 219,132 tons of raw sugar to the U.S. and other markets in the year ended Aug. 31, according to the government Web site. Domestic raw sugar prices jumped 10 percent to 1,658.33 pesos ($36) per 50-kilogram bag on Jan. 7 from a month earlier, according to the regulatory body’s Web site.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net