National Sugar Under Scrutiny Again, But Its Listed Companies' Performance Remains Sweet?

Indonesia’s sugar industry currently has a complex historical and structural track record. Before independence, Indonesia held the position of the world’s second-largest sugar producer after Cuba. However, that status has shifted dramatically, making Indonesia a country with very high dependence on sugar imports. This fundamental change was partly triggered by past economic policies, including the adoption of free-market recommendations from the International Monetary Fund (IMF), which eliminated bans and restrictions on domestic commodities. The lack of adequate protection at that time opened the door for imported products to enter massively and alter the national sugar trade structure to this day. The domestic sugar industry is under scrutiny following comments from Danantara’s Chief Operating Officer (COO), Dony Oskaria, who highlighted the uncontrolled influx of sugar imports that is impacting the local industry. “This year, Sugar Co recorded a loss of Rp 680 billion due to prices that are indeed not good enough, resulting from uncontrolled sugar imports,” said Dony. He explained that the entry of refined sugar into the consumer market is pressuring local sugar prices and making it difficult for the industry to develop. According to him, this situation could continue to squeeze the national sugar industry if not addressed promptly. Dony also mentioned government intervention steps that have been taken but are deemed not yet effective in improving the market. “I have discussed this several times with Mr. Minister of Agriculture (Amran Sulaiman); actually, we are providing subsidies to the market to absorb all the sugar from the public amounting to Rp 1.5 trillion. But that also did not give a significant impact,” he stated. Citing the Central Statistics Agency (BPS), national sugar production increased in 2024 to 2.46 million tonnes, up from 2.23 million tonnes in 2023. This rise was supported by the expansion of sugarcane planting areas to 520,823 hectares, higher than 489,338 hectares the previous year. The largest source of growth came from smallholder plantations, with production reaching 1.61 million tonnes, or about two-thirds of the national total. Indonesia’s sugar production structure indeed relies on farmers. Over the last decade, the contribution from smallholder plantations has consistently been dominant. In 2014, smallholder production was at 1.37 million tonnes. That figure has remained high until 2024. State and private large plantations, on the other hand, tend to stagnate or even decline compared to a decade ago. Paradox of Production and Import Flows The current sugar industry situation is marked by opposing dynamics between upstream capacity and downstream market stability. Based on Central Statistics Agency data, national sugar production actually shows an increasing trend. The expansion of sugarcane harvest areas has become the main driving factor for growing domestic production capacity. Despite the increase in domestic supply, sugar import volumes still record substantial figures each year to meet the total national need of around 5.3 million tonnes annually. Challenges in Distribution and Leakage of Refined Sugar The market structure imbalance above is further exacerbated by weaknesses in the distribution chain. The main challenge pressuring the stability of local commodity prices is the indication of leakage in the distribution of refined sugar made from imported raw sugar. Products that are strictly allocated by regulation for the processing industry sector are known to leak into the household consumer market on a massive scale. This supply leakage causes locally produced white crystal sugar, which is mostly supported by sugarcane farmers, to struggle to be optimally absorbed by the market. As a result, the selling price of the commodity is pressured, triggering losses across various lines, from declining farmer incomes to hundreds of billions of rupiah in losses recorded by state-owned corporate entities in the sugar sector. As a mitigation and structural improvement step, the government is implementing tightened import regulations, food holding consolidation, and the implementation of a massive ratoon dismantling programme or sugarcane plant rejuvenation with a target of achieving self-sufficiency in consumer sugar by 2027 at the latest. Performance of PT Aman Agrindo Tbk (GULA) Amid Market Volatility Price pressures and trade uncertainties directly affect the financial performance realisation of issuers in the sugar sector, one of which is PT Aman Agrindo Tbk (GULA). As a business entity focused on trading white sugar, liquid sugar, and medium-scale sugarcane plantation operations, the company’s business continuity heavily depends on domestic market price stability. The presence of imported refined products filling the retail market share creates a highly competitive pricing climate for the company’s trading business line. Based on the 2024 financial statements, the company needs to implement strategy adjustments to maintain operational profitability levels. The company’s revenue is mostly contributed by trading activities in the sugar segment, while revenue from pure sugarcane harvest sales was recorded at Rp 4.03 billion. The total sales volume of internally produced plantation commodities, namely sugarcane, reached 238.02 tonnes over the one-year period. Resilience of PT Tunas Baru Lampung Tbk (TBLA)’s Business Model On a different spectrum, PT Tunas Baru Lampung Tbk (TBLA) displays a more resilient operational profile through the application of a fully integrated business structure. The company manages the supply chain from upstream to downstream independently, encompassing sugarcane plantation operations to the management of processing factories for end products. This integrated business model provides flexibility for management.