Sugar industry decline due to SRA syndicate

In 2021, because the shortage was getting more and more serious, SRA was forced to lift the export allocation, but that was seen by producers as only temporary.

Over the last two decades, the Philippines has experienced a growing deficit in sugar production due to various factors, such as the failure of land reform, inadequate government support (sugar subsidy), increasingly unpredictable weather conditions, and industry-wide resistance to change. The Philippines sank from Asia’s largest exporter down to a net importer. Thailand, who in the ‘60s learned from us expertise in sugar production, now supplies us with most of our imported sugar.

President Rodrigo Duterte ordered the setup of a sugar subsidy to help farmers. But it was a failure because only a small portion was given to farmers.

These have all contributed to an increasing shortage, with the price of retail sugar skyrocketing 70 percent over the last year alone, based on data of the Sugar Regulatory Administration (SRA). The shortage is so bad that some big soft drink and food manufacturers may soon stop production.

However, there is a more sinister factor, which greatly contributed to this dangerous situation — the existence of a powerful clandestine syndicate within the SRA, in partnership with a handful of big-time traders. Various planters and millers I have interviewed attested to this.

Over the last decade, the SRA had instituted a policy of allocating 5 percent to 10 percent of locally produced sugar to fulfill the US export quota, even though we are a net importer of sugar. We are exporting even if we have a local shortage. SRA’s pretext was, if we fail to fulfill the quota, the US would permanently remove our quota.

A letter dated 9 January 2013, from Harry Kopp, Washington representative of the US-based Sugar Alliance of the Philippines, revealed that the SRA pretext was a total lie. The letter said, “if it (Philippines) decides not to fulfill the quota for 2013 that THIS WOULD NOT IMPACT (on) the Philippines’ future access to the US sugar market.” The SRA kept this letter secret so that the syndicate and its trader-partners could make windfall profits in the process.

How do they get the windfall? In the crop year 2020 to 2021, domestic retail price of sugar stood at P1,500 per 50-kilo bag, while the Thai import price was P1,100 per bag. The difference of P400 per bag, or almost a third of domestic price, is clearly a big windfall for importers. Multiply P400 with the number of bags (2,240,160) and we get a staggering windfall of about P896,064,000 for the SRA syndicate and its partner traders, who purchased the lion’s share of total imports.

The export allocations were not mandatory, but SRA inhibited their future sale in the domestic market. There’s talk that a few sugar producers (millers and planters) defied the export allocation policy, foreseeing a looming serious shortage. They held on to their export allocations, hoping they could be “converted” and sold back to the domestic market. But despite the severe shortage, conversion was disallowed and importation was prioritized because it was to the benefit of the syndicate and its partner-traders as explained above.

They induced a shortage and higher prices. To date, the cumulative disallowed conversion of export sugar in the past four years, as of this writing, amounts to about 9,965 metric tons or 199,300 bags sitting in warehouses. SRA refused conversion on the pretext that it was “a bad precedent.” Is it so bad if it triggers an avalanche of conversions which would both reduce the need for imports and benefit consumers by controlling domestic prices? This is how the SRA syndicate and its partner-traders strangle producers and consumers for vested interests.

In 2021, because the shortage was getting more and more serious, SRA was forced to lift the export allocation, but that was seen by producers as only temporary. There is no assurance that the SRA will not revive the export policy again once the shortage tapers off, otherwise they lose their “pie.”

To revive our sugar industry, the suggested policy reforms include 1) institute a transparent subsidy immune to corruption, 2) neutralize the SRA syndicate and make the SRA leadership accountable, otherwise our sugar industry will slowly die. Our sugar community hopes Ferdinand Marcos Jr., as President and DA Secretary, can rescue our beleaguered sugar industry.

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