For 2010, the US Trade Representative (USTR) is allocating 142,160 metric tons raw value (MTRV) or about 158,906 MT of raw cane sugar to the Philippines. It is the third biggest allocation out of 40 countries (accounting for 12.7 percent of the total) granted with quota, behind only the Dominican Republic and Brazil, under the US’s TRQ system. [2]
El Niño, Biofuels
Official data, however, also show that in the last crop year (2008-09), raw and refined sugar production declined by 3.56 million MT or about 13 percent. Another year of lower production this year due to the expected El Niño could put the country in a similar situation in the 1998-2000-period, government officials and industry players said.
While production in 2008-09 did fall, the country still managed to post a surplus of about 165,187 MT of raw and refined sugar in that crop year. This surplus had already taken into account the country’s quota exports to the US of 57,885 MT in 2008-09. If we did not export to the US, the surplus would reach 223,072 MT. (See Table 2)
There is no official estimate yet on how big the impact of this year’s El Niño on the sugar industry will be. Large sugar players though are reporting production decline and anticipate further plunge. Victorias Milling, for instance, said that its production already fell by 18 percent last year and may again decline this year due to extreme weather events. [3]
Aside from El Niño, another source of pressure on local sugar production and supply is the competition from biofuels. The diversion of cane from sugar millers for the production of ethanol means less available sugar for the country’s food requirements. Republic Act 9367 or The Biofuels Act of 2006 mandated a 5-10 percent ethanol blend for gasoline products sold in the country.
Best Safeguard
But at this point, everything is still speculative. And the best safeguard that we have against threat of lower production is not the importation of expensive sugar but an immediate halt to exportation, in particular to the US. This is justified by our food security interests. During the height of the global rice crisis in 2008, major rice exporters such as Thailand and India suspended exports. The SRA simply needs to fulfill its mandate of regulating sugar export to ensure domestic supply.
For the surging prices, government must impose a price ceiling and not simply a suggested retail price (SRP). Sugar, as a basic necessity, is among the products covered by RA 7581 or the Price Act of 1992. At present, the government’s SRP of P54 per kilo reflects the massive speculation in sugar prices and thus unreasonable. The sugar imports, at best, could only bring down prices to a still inflated P48 per kilo. [4]
A more rational retail price should be about only P42 or the prevailing price in Metro Manila in the last week of November, based on the assumption that the steep increases in prices since December are speculative and not justified by the supply-demand balance and changes in production costs. This must be accompanied by a serious crackdown not on small retail outlets but on the largest private sugar traders that hoard supply.
Another policy move in relation to supply should be the review of the biofuels program. RA 9367 itself provides for a review by the National Biofuel Board (NBB) of the supply of locally sourced biofuel feedstock such as sugar cane and make necessary adjustments in the biofuel blend. Even before the recent surge in sugar prices, the local sugar industry could supply only about 79 percent of RA 9367’s minimum requirements (i.e. 5 percent ethanol blend). [5] Surging food prices, on top of land reform and environmental issues, must pressure policymakers to reconsider the country’s biofuels program and correct a policy that further undermines local food production.
Private traders, of course, want to take advantage of high global sugar prices and would rather export their commodity for larger profits. Or some commercial planters may want to sell their produce to ethanol plants that offer a bigger margin. Neoliberal thinking dictates that this must be allowed so that market forces can determine the best value of a commodity. But at the receiving end would be the ordinary people who will be forced to contend with high and increasing prices and at the same time the direct producers of sugar — the poor farm and factory workers — who continue to receive depressed wages amid soaring market prices.
Sources
[1] GMA News website, “Sugar prices may go up P54/kilo in February”, January 26, 2010,
[2] US Trade Representative website, “USTR announces FY 2010 Tariff-Rate Quota allocations for raw cane sugar, refined and specialty sugar, and sugar-containing products”
[3] Manila Times website, “Domestic sugar output to plunge further”, January 28, 2010
[4] GMA News website, “Agri dept expects imports to bring down sugar prices to P48/kilo”, January 29, 2010
[5] Arnold Padilla, “Pro-Arroyo landlords in Congress to reap profits from Biofuels Act”, IBON Features, published by Bulatlat.com, Vol. VII No. 3, February 18-24, 2007
