Help the sugar industry rebuild its global stature
THE decision of the Sugar Regulatory Administration (SRA) as announced on Monday to allow the importation of 160,000 to 200,000 metric tons of sugar in the coming weeks is wholly necessary to stabilize the country’s supply and prices under the present circumstances. From here onward, however, the sugar industry and policymakers must ensure it is the last time such a decision has to be made.
Sugar is a relatively bright spot in Philippine agriculture. The country is capable of producing sugar in abundance, so much so, in fact, that a considerable portion of each year’s production is earmarked for export. Even with the various handicaps the sector faces, there is realistically no reason short of a significant natural disaster that destroys a large portion of the crop that local market demand cannot regularly be met by robust supply at appropriately competitive prices.
The handicaps are not insignificant, though, and do require effort to overcome. Sugar is one of the most heavily regulated trade commodities under World Trade Organization (WTO) rules, which makes what should be the reasonably straightforward process of moving sugar from producers to consumers complicated and difficult to manage.
Like other agricultural sectors, the sugar sector has also been handicapped by decades of insufficient and inefficient development support, and has less than adequate levels of mechanization and production infrastructure – farm-to-market roads, mills, and storage facilities – to realize its full potential.
Sugar production has also been affected to some extent by land reform, which breaks up sugar farms into unprofitable small parcels. More than most other commercial crops, sugar requires larger scale to be economical, so while land reform has been a benefit to some sugar farmers who have some other options, it has in general been a disadvantage to individual farmers and the sector as a whole.
The biggest problem faced by the sugar sector, however, is rampant speculation and price manipulation on the part of merchants in the middle of the supply chain. These opportunistic traders use the day-to-day difficulties faced by the industry—the unavoidable fact that sugar has essentially only one growing season, the artificial supply constraint of export earmarks, and lately, higher taxes under the TRAIN law—as excuses to impose almost criminally high prices on sugar, at the expense of both consumers and producers.
The difference between domestic and world sugar prices as a result of this unchecked market piracy is staggering. Currently, the wholesale price of Philippine sugar is about P2,070 per 50-kilogram bag, or about P41.40 per kilo. The indicative world price of sugar, by contrast, is currently about $0.1235 per pound, or $0.2717 per kilo – approximately P14.40 at current exchange rates, about one-third the price of Philippine sugar.
The decision to import sugar to stabilize the market is the correct one, because the situation has reached a point where there are no other prudent options. Government and policy-makers, as well as industry stakeholders, must share equal parts of the blame for letting the situation reach this point. Through a combination of turning a blind eye to corrupt practices, inadequate planning, short-term thinking, and perhaps even a bit of a bias against the sugar sector as a poor man’s industry, a sector that has all the fundamental attributes it needs to be a healthy economic ecosystem has been allowed to become almost completely dysfunctional.
As it seeks to maintain growth and improve the sustainability of the economy, the country must make the most of its natural advantages, and its sugar sector is one of these. It is high time that effective policy and improved industry performance be applied to maximize and restore the sector’s former global stature, rather than allow it to deteriorate further into a national embarrassmen
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