Boosting sugar supply requires structural reforms–lawmaker

The chairman of the House Committee on Ways and Means said the country will continue to see elevated sugar prices until there is a significant infusion of new and cheaper supply.

Albay Rep. Joey Sarte Salceda, in a statement, said while sugar prices domestically may marginally ease as sugar stocks increase during the milling season starting this month, this will be “transitory.”

“Imports will probably be what we need among industrial users and bottlers,” he said over the weekend.

“Some sugary drink bottlers may be forced to shift to high fructose corn syrup if sugar supply remains unreliable over the coming weeks. HFCS is taxed at a higher rate under the TRAIN law (P6 per liter for sugary drinks, P12 per liter for those sweetened with HFCS), so we may begin to see price hikes there rather than companies stopping bottling.”

On that note, Salceda said the House Committee on Ways and Means will immediately conduct briefings with the Bureau of Customs on import levels of sugar and other sweeteners, and with the SRA on mandatory programs under the Tax Reform for Acceleration and Inclusion (TRAIN) law to boost domestic production.

“On sugar exports, we do have a US Quota system where Philippine sugar producers are able to sell to the United States at a premium from regular world prices, but regular prices are around 30-40 percent cheaper than Philippine prices, so I highly doubt that there is significant incentive to do that in large quantities. I think most exporters are only fulfilling contracts.”

Joint projections by the Organisation for Economic Co-operation and Development (OECD) and the United Nations’ Food and Agriculture Organization (FAO) showed that the Philippines will continuously import sugar from 2023 until 2031 to boost its domestic supply.

The Philippines may have to import an average of 282,670 metric tons (MT) of sugar annually in the next decade to meet growing demand for the sweetener as local production stagnates, based on international projections.

The BusinessMirror recently broke the story that the SRA is planning to import 300,000 MT of additional sugar to ensure adequate supply until the next milling season peaks.

‘Highly labor intensive’

According to Salceda, sugar is a “politically and socially” charged issue in the Philippines because the domestic sector is highly labor intensive.

“The sector employs close to 700,000 workers directly, or around 1.6 workers per hectare cultivated. Compare that to 0.53 workers per hectare of rice land cultivated, or the 0.77 workers per hectare average for the entire agricultural sector. In other words, if we end up swamping the country with sugar imports, we will very likely kill a lot of jobs immediately.”

“This is a problem we can no longer leave to the next generation. Every country on earth that has focused on sugar monocropping eventually suffered economic tragedy.”

Salceda said the country must diversify its sugar farms, and it must diversify the regional economies that depend on sugar for employment.

“Both the Speaker and the Senate President are from sugar producing provinces. We can no longer defer structural solutions for the sugar sector. This is the time and the political moment for it,” he said.

“I am not convinced that the solution is as simple as just freeing up the sugar imports sector. Indeed, our very segmented sugar sector—separating farming from milling from refining from trading—has led to massive costs of transport, logistics, and intermediation, with every stage having middlemen. This, of course, is on top of opportunity costs incurred from lack of economies of scope.”

Salceda said the SRA has also been “ineffective,” historically, at developing the sugar industry, with very low program administration rates, saying “low utilization was why they have been given low allocations from TRAIN law revenues.”

Last month Salceda made five recommendations to address domestic sugar issues, on top of importation, including the shift to non-sugarcane companies by alcohol companies. He also urged the Philippine Competition Commission to undertake “more aggressive measures” to ensure that traders do not collude with each other on supply.