James Christopher L. Ledesma, administrator of the Sugar Regulatory Administration (SRA), said sugar production may hit a level that was earlier expected or at 2.01 million metric tons MT.

"We had a dry spell at the start, but when the harvest season started, there was a wet spell which is also not good for production. For now it’s slowing down the harvest," said Ledesma in an interview.

The high cost of inputs and transportation also depressed farmers’ fertilization which is contributing to the output decline.

With the rising price of sugar in the world market, government is trying to arrest speculation in the local market that is lifting price up even as it wouldn’t want any importation that could hurt consumers amid the output decline.

Sugar retail price has been going up to at least P32 per kilo even if prices at sugar-producing regions are still lower at P29.88 per kilo in Panay, P28 to P29 in Cebu, P28 in Mindanao, P30 in Leyte, and P30.44 per kilo in Negros Occidental.

"We should control speculation. It’s driving the market up. We’re not yet at the peak of harvest; the peak will be in March yet. We’re producing at two times our consumption, there is enough supply, but price is going up and is defying the law of supply and demand," Ledesma said.

Archie B. Amarra, executive director of the Sugar Master Plan Foundation Inc. (SMPF), said world market price has risen to {{MB:DR(ARTICLE:CONTENT):MB}}.15 per pound from maybe {{MB:DR(ARTICLE:CONTENT):MB}}.07 per pound a year ago as sugar producers Thailand, Mexico, and the US have been hit by a drought that cut output. Big sugar producer Brazil also allocates more than half of its sugarcane production for ethanol, constricting world supply.

"We don’t want to import. Landed cost will be at P1,050 to P1,000 (per 50 kilo bag). That will be P1,450 at retail (with hauling, storage, profit margin) higher than (the locallyproduced at) P1,400," Amarra said.

Ledesma said government hopes production will just be enough to meet local consumption since only raw sugar consumption has been rising while refined sugar demand is still down. But if a need to import sugar really arises, that will be determined in April or May yet when the lean months approach.

Amarra said raw sugar consumption from September to December 2005 rose by five percent cumulatively but refined sugar use is lower by 13 percent at present compared to the same period last year.

"Industrial users are starting to buy. It’s not that they’re consuming, they could be stocking because if you buy at the peak of the milling season, price is lower. By the end of the milling season, there’s no more buying," Amarra said.

The SPMF official said government is still optimistic sugar importation can be stopped even despite the increase in the Philippines’ sugar export to the US this crop year (from 137,000 MT to 186,000 MT) with a large carry-over inventory from the last crop year of 230,000 MT.