Uphill fight

IN 1991, I was invited to present a paper in an international conference in Seoul, Korea on the impact of the ASEAN Free Trade Agreement on agriculture. I spoke on the threat to the Philippine sugar industry. The conference was an assessment since the adoption of AFTA ten years earlier.

The Philippines had asked, and got postponements of implementation of the agreement for the Philippines. We failed to prepare, so again we asked for another five years delay. At this time the Philippine sugar industry was doing well and nobody bothered to prepare for this eventuality.

Since that Seoul conference I wrote and talked about the need for the industry to gear up for the time when quantitative and financial barriers against importation will have to come down and allow the free flow of cheap sugar particularly from Thailand.

There was apparent complacency. In fact the focus was to stop smuggling. It was like trying to stop a drip but not preparing for a flood. Finally the Sugarcane Industry Act of 2015 was passed. There are provisions ostensibly to prepare for the lifting of import controls.

While there are measures supposedly to cushion the effect of the full implementation of the AFTA, these are inadequate like the provisions for mechanization of parcelized sugar lands due to CARP.

Sugar prices were high and SIDA provided for import control by assigning that sugar to reserve. The story of this sugar and the series of swapping are, however, not a matter for this column. Our focus is historical, especially the industry’s current history.

I wrote my misgivings on the term “sugarcane industry” instead of the historical “sugar industry” as we still do with the Sugar Regulatory Administration.

SIDA in effect failed to consider the already rising use of high fructose corn syrup. The term “sugarcane” is restrictive in a real sense. Sugarcane produces sucrose while corn produces fructose. Although both can be considered “sugar” in general comprehension they have differences. Before this fight against HFCS erupted, nobody bothered with HFCS.

I recall writing several columns on this subject and the threat to the sugar industry.  The price of sugar was great, there was false sense of security with SIDA and the government (and the industry) was busy running after smugglers.

The industry must face the reality of economics. They know this by heart being businessmen. They cannot force other businessmen to stop using low-cost inputs. As physical law tells us, water seeks its own level. Similarly, any businessman, the planters included, will look for the cheapest possible input to production.

It is not only the beverages companies that are using HFCS; a friend told me his favorite beer is now using HFCS than sugar. He said the beer company has large areas planted to corn for the HFCS and thus it does not buy sugar. Should it not be also boycotted?

The fight against the import of HFCS might be legislated to protect the industry, but due to the extremely low cost of HFCS, can the beverage companies, following the planters’ rationale, not follow suit and develop their corn sources as the beer company?

Sugar planters are losing due to high production cost. Indeed as one planter said on radio, the cost would reach sky high when the new tax reforms are approved. The cost of fuel cannot be prevented and down the line, will be other inputs.

Consider the way planters transport their canes. In the past canes were loaded in train cars. Now they are in trucks. A sugar mill in Sagay transport canes from La Castellana and Magallon and probably elsewhere. The same system goes with other mills. Wonder why the cost of sugar is high?

There is folly in trans-loading and trucking but sugar prices are high and profits are good until now. With the drop in prices, how long can this system be sustained?

Most consumers welcome the low sugar price thus many do not heed the boycott and beverage companies can cushion their losses by the sheer size of their businesses.

The industry survived many crises since 1900 through protective legislation. However, can government legislate again to retain the high sugar price without violating our international trade agreements and the rights of others? Or should the industry adopt measures to compete with HFCS? Should it develop new strategies against the competitor’s high ground?

Realities have changed and so must the responses be.

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