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Business

Sweet nothing

DEMAND AND SUPPLY - Boo Chanco - The Philippine Star

A lot of people gave President Junior the benefit of the doubt after he appointed a lot of credible technocrats in his Cabinet. Now those technocrats may be having second thoughts and will take time to cover their asses before making decisions.

President Junior shouldn’t have thrown Usec Sebastian to the wolves with threats of criminal investigation. It seems the Usec believed he had Junior’s ok and authority. He acted with a sense of urgency expected of him in a crisis.

Got this Viber message from a source close to Usec Leo last week.

“I spoke to COS Leo about this last night. He told me that they briefed the President last week, he agreed on the need to import 300,000 MT of refined sugar, and instructed them to prepare paper for this. Since he was given authority to sign on his behalf thru an SO from OP, he did sign it to facilitate matters and bring down sugar prices immediately.

“He was shocked to learn that PBBM is disowning the decision. There must be a last-minute lobby by someone close to him. COS Leo is tendering his resignation today as he cannot stomach the politics of it and the poor guy is seriously overworked.

“Authority to sign was issued by ES with the prior approval of the President. With Usec Leo’s resignation, DA operations will be at a standstill because nobody will be signing papers except the President.

“Things were already in slow-motion mode prior to this because everyone is second guessing what to do. No fertilizer subsidy, distribution of seeds stalled, awarding of new batch farm machineries halted, etc.”

Junior said in a TV interview there is enough sugar stock in the country and importation is not required now. Senate President Miguel Zubiri said there are 127,000 MT of sugar still in local bodegas.

Why aren’t those stocks being released? How come the price has gone up to P110/kg from around P50 to P70/kg  in the local market?

Basic supply and demand indicate there is inadequate supply. Is there hoarding to bring prices up? Only time will tell who is telling the truth.

The beverage industry is already in panic mode. Former DILG Secretary Raffy Alunan, who knows the industry well, posted their concern on Facebook.

“The beverage industry led by Coca-Cola, Pepsi-Cola, and RC Cola will run out of premium sugar needed for bottling their carbonated soft drinks by next month, September.

“This is a time-sensitive matter… Otherwise, bottling plants will experience production downturns and labor layoffs; the government will experience lower tax collections and diminished investor confidence; consumers will be deprived of affordable soft drink supply.”

Former DTI Secretary Ramon Lopez is worried about food processing industries moving to neighboring ASEAN countries where sugar is two to three  times cheaper than here. Under the ASEAN trade agreement, they can then send those products back here duty free.

Even now, the market leader in instant coffee is an Indonesian brand. Instant drinks have moved to Thailand and the biggest dried mango processor expanded plants in Cambodia, not in Cebu, Lopez said.

My friend Rep. Joey Salceda, however, sees in this crisis an opportunity to collect more taxes because bottlers will be forced to import high fructose corn syrup (HFCS), which however brings up health issues.

Salceda said HFCS-sweetened beverages are taxed with higher excise tax rates at P12 per liter compared to the sugar-sweetened beverages at P6 per liter.

Salceda also wants VP Sara’s DepEd to ban soda in public schools. (Half of a recently proposed import of sugar was earmarked for the production of sweetened beverages.)

A study by the Food and Fertilizer Technology Center, based in Taiwan serving small farmers in Asia Pacific, showed how far behind our sugar industry is.

“The 28 sugar mills operate at 66 percent capacity, giving an average recovery of 1.8 bags/ton cane (one bag=50 kilograms), which is low considering the sugar recovery of 2.4 bags in more efficient mills… There are also 14 sugar refineries with a combined capacity of 8,000 metric tons of refined sugar per day operating at 70 percent of mill capacity and four bioethanol distilleries producing 25 percent of the mandated ethanol market.

“In terms of sugar yield, the Philippines has a lower sugar yield at 5.1 tons sugar/ha compared to other major producing countries such as Thailand, with 22 percent more.

“With respect to sugar recovery per ton of milled cane, Brazil recovers 58 percent more; Australia, 45 percent; China, 36.5 percent; and Thailand, 15 percent more than the Philippines.

“In terms of prices, domestic sugar prices are typically higher compared to world prices…”

“Low productivity is one key issue that besets the sugar industry. Comparing the Philippines with other Southeast Asian countries, such as Thailand (sugarcane production is 100 tons of cane per hectare), the country has low productivity that is estimated at 60 tons of cane per hectare.

“This could be attributed to production issues… These concerns can be addressed through improvement in the varieties of planting materials, establishment of nurseries, improved fertilizer use and efficiency and improved irrigation systems.”

In 2015, the Philippines passed RA 10659 or the Sugarcane Industry Development Act (SIDA) supposedly to help the sugar industry improve competitiveness and maximize the utilization of sugarcane resources, and improve the incomes of farmers/ farm workers.

The past administrations have underspent allocated funds under this sugar law. What should be prioritized now is the improvement of planting materials and the irrigation systems to eventually increase yield, the paper suggests.

Clearly, the backwardness of our sugar industry is the problem. And we see no real effort from the industry to improve. It has become a habit for some to warn that millions of farm workers will lose livelihoods if the industry is not protected.

It might have been a better option for Junior to give emergency cash assistance to affected sugar farm workers rather than put the weight of neglect on the backs of domestic consumers who must pay high prices for sugar industry inefficiency.

When will the sugar industry be competitive? What we have now is sweet nothing… This romance between the government and the sugar industry is scandalous and not doing any one any good.

 

 

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco.

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