Liberalizing sugar trading-2

LAST WEEK I asked: will the liberalization of sugar trading be good for the industry and the consumers?

Considering the flood of petitions, press releases and manifestos from various groups in Occidental Negros, the answer is: it is bad for the producers. Predictions of industry’s demise, collapse of other businesses that depend on the incomes in Negros, the rise in criminality and insurgency, the bankruptcies of industries and even mass malnutrition reminiscent of the 1980s – all paint a dismal picture of Negros whenever the industry “died.” Indeed, but “if the industry died.”

But there is no response whether it will also be good for the consumers. The government simply reiterates its plan – liberalize the industry. Without saying so, common sense tells us that high prices of sugar are bad for the consumers because they have to carry the brunt of the high cost of a basic food, not just directly ingested but as necessary ingredients to other food products that millions of Filipinos consume each day – from babies to adults. Even the diabetic tries to take some.

I believe that the government had given its answer to the above question and is sticking to it: liberalization is good for the consumers and since there are more consumers than producers, it follows that the government will take the side of the consumers. A low sugar price in the market reduces the inflation rate – the only indications that economic bureaucrats look at each day to project the future. Sugar is an indicator in determining the nation’s inflation rate.

Sans therefore the intervention of President Duterte, the plan for liberalization of the sugar industry as with rice is a matter of time. Not even Congress can stop it, much less politicians.

Politicians, especially those running in the elections, will understandably proclaim their support for the producers when they speak in a place like Negros, where there are many people involved in the industry, but will be singing a different tune when confronted in other provinces where there are no producers and lots of businesses that complain about the high cost of sugar. Consumers do know that imported sugar is cheaper and will be happy with liberalization and angry at politicians advocating sugar import controls.

There is no way the Philippines can compete with other large sugar producing countries like Thailand, Australia and now India. The other day world raw sugar price is P16.45 per kilo; ours is P29.50 – give and take a few cents. Is it fair to force the consumers to pay so high a price? The answer is obvious.

In effect, the consumers subsidize the Philippine sugar industry. Is that fair? Again, the answer is obvious.

But here is a seeming anomaly. The American consumers pay P62 per kilo for raw sugar. Similarly then the American consumers subsidize the American sugar industry, more than we do for the producers.

Now, we export sugar to the US at P1,273.68, the price paid to the producers. That is P25.47 per kilo. Thus we also subsidize the Americans. This is done through force by the Sugar Regulatory Administration that sets aside a portion of our sugar for the US market although our entire production is lower than our consumption. If all our sugar were sold here, the producers will have a little bit better price. So why is SRA forcing the producers to sell to a low priced market and deprive the producers a few more pesos? Does that make sense?

The government economic managers are intent to open up importation. The reality of world prices against ours makes our sugar based products for export less competitive without hope of ever competing. We are no longer the biggest dollar earners. Food producers are a rising exporters, dollar earners.

Liberalization should begin with SRA to not force the producers to sell to the US but to the local market even if it gave just a few more pesos. Sure, I understand our international commitment, but the US will understand, it can buy (soon) from Cuba and other cheaper markets. The SRA commitment should first be the Filipino producers.

Of course I understand that without SRA having to allocate or regulate, it has no more reason for being. But as I said, SRA as presently constituted and mandated is already redundant and must be changed.

We’ll continue next week.