Sugar has become our bitter pill

(Part 2)

Everyone’s still talking about this bitter pill of the times; some readers, for instance, reacted to Monday’s column on the sugar mess.

Malacanang has said the shortage is artificial, attributing it to hoarding, but some readers noted that the bodegas that are supposedly full, consist of sugar legally imported by industrial users under Sugar Order No. 3 or the Sugar Import Program for crop year 2022.

“These cannot be withdrawn and released to the domestic market for resale, lest these industrial users forfeit the hefty performance bond that they had to put at stake under SO3 for non-compliance,” said a reader from the sugar industry.

“SO3 prevents the resale of this relatively cheap sugar to the domestic market for profit’s sake.  This is what the critics do not understand,” the reader added.

Against this backdrop, some sugar users can’t meet their requirements. It’s the reason that even some softdrinks makers slowed down production. SMEs, too, are feeling the pinch caused by high sugar prices.

Addressing the shortage

The reality, therefore, is that there is a shortage. Users can’t buy the sugar they need. And while President Marcos may not be at fault for our present sorry state, his administration should act on it immediately and not wait until October.

What to do then? As with any other commodity in the market, supply and demand must be balanced.

I asked several sources from the sugar sector and they said that without immediate importation, prices will continue to increase; smaller businesses and Filipino consumers will be affected the most. SMEs, for instance, may continue to lay off workers.

One softdrinks maker said the shortage is closer to 500,000 metric tons.

If this is the case, the 100,000 to 150,000 MT that the government  plans to buy overseas in two months time will hardly make a dent in the already scarce commodity.

Sugar supply chain

Moving forward, advance planning is needed in the sugar supply chain just like in other basic commodities.

This is no different from restaurant owners who need to plan their inventory requirements in advance instead of buying what they need only when their diners come.

Aside from advance planning, the government should also consider the fact that producing sugar isn’t a simple process. It’s complicated, industry players explained.

It starts with refining raw cane, paying the taxes, fulfilling the documentation requirements, and then trucking and shipping from the sugar capital of the Philippines in the Visayas to either the ports of Manila or Batangas. Barring shifting weather patterns and other acts of nature, the whole process typically takes over two months.

Thus, the local market may sometimes face supply disruptions as what is happening now.

Policy-based importation

In some developed countries, the government can automatically import commodities when the buffer stock falls below a certain threshold. Thus, deciding whether to import or not is policy-based and no longer a discretionary decision.

Another industry source, also reacting to Monday’s column offered a possible solution:

“Allowing refiners and the traders to import may help SMEs because at present, SMEs don’t have the capacity to import directly. Only the established industrial giants will have the advantage to import cheap sugar, disenfranchising SMEs.”

Among the different sectors, the beverage industry consumes the largest share of the white sugar market, but some players said that allowing the giants to import directly will diminish the ability of traders to support the domestic market.

These are just some of the different problems in the sugar industry and some possible solutions.

As I said, the government must really look into the root cause of the issues and investigate why there is a shortage. It must also help the local sugar industry become more competitive and abolish syndicates or unscrupulous traders.

A careful balance must be attained between protecting consumers against rising prices of basic commodities and ensuring the viability of local industries.

In the end, if supply and demand is more balanced, it will immediately solve the country’s sugar woes. It will bring down prices and mitigate smuggling.

Government doesn’t have to step in to control prices since these will be determined by the free market. Controlling prices will only discourage farmers and the industrials from producing more for fear they will have to sell below cost.

Hopefully, we can soon enjoy the sweetness of sugar once again, and not as the bitter pill that is has become.

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com