After weeks of uncertainty over sugar allocation, the Sugar Regulatory Administration (SRA) finally decided that 7 percent or 153,000 metric tons (MT) of the country's sugar output for the next crop year will be exported to the United States.
In Sugar Order (SO) no. 1, SRA specified that 7 percent of the total output for this coming crop year would be 'A' sugar, while 93 percent is 'B' sugar.
In a text exchange, SRA Chief Hermenegildo Serafica said the allocation was based on consultation with sugar producers, namely the planters and the millers.
“Majority of them have submitted their positions in allocating sugar for the US Quota. Since they recognize that surplus supply of domestic sugar has to be shipped out otherwise, the balance between supply and demand will not be profitable for the producers," Serafica said.
“Those against exports should also consider that if there is much supply than the demand, then who will buy the excess sugar? If no one will buy their sugar, they will certainly be at the losing end. This is simple economics," he added.
He also said that the US Quota is a preferential market which offers better prices compared to the world market price.
However, producers, — who have been asking for the government to keep bulk, if not all, of the sugar output here in the country — reluctantly agreed with SRA's decision saying things could still get problematic because of this.
Nicolas Ledesma, Jr., chairman of the Negros-Panay chapter of Confederation of Sugar Producers Associations, Inc. (CONFED), said SRA's decision is problematic but the "group can live with it as long as the government will not allocate sugar to the world market," which is considered a "dump market" for major sugar producing countries like Thailand.
"As much as CONFED proposed 6 percent for 'A' and 94 percent for 'B', we think the additional 1 percent, which we estimate to be 153,000 MT over the US quota of 136,000 MT, might create problems due to demand in the US because of the pandemic," Ledesma said.
"But we can live with that for as long as we have no 'D' allocation and no sugar importation for this crop year 2020 to 2021," he added.
CONFED is the largest group of sugar producers in the Philippines which sugar crop year starts in September and ends in August the following year.
Asociacion de Agricultores de La Carlota y Pontevedra, Inc. (AALCPI) President Roberto Cuenca said he and the board will follow and abide with the decision of the majority".
The reason why AALCPI and other sugar producers don't want to export sugar is because they are forced to export their output at a relatively lower price to compete with the world market.
Earlier, (AALCPI) asked the SRA to maintain the status quo of sugar classification for the coming milling season to ensure that the country will have enough supply of the sweetener during the COVID-19 pandemic.
Every start of the crop year, SRA, the government agency tasked to regulate the sugar industry, gets to decide how much of the country’s expected sugar production gets to stay here in the country and will be exported to the world market to balance the prices.
Sugar production is divided into different classifications, including ‘B’ for domestic sugar, ‘A’ for sugar exports to the US, ‘D’ for sugar exports to the world market or other countries, and ‘C’ for reserves.
Over the past weeks, several groups of sugar producers in the country had been asking the government to keep a bulk of the sugar output for the domestic market to make sure the country will have enough supply of the sweetener during the pandemic.
For this crop year, sugar production is estimated to be "more or less" 2.19 million MT, according to SRA. This is 2 percent higher than the 2.145 million MT produced in the recently ended crop year.
Of this, domestic demand is expected to take up only 1.97 million MT.
To recall, the Philippines is one of the select countries given an annual allocation of sugar export to the US market at a premium under a tariff-rate quota.
Tariff-rate quotas allow countries to export specified quantities of a product, like sugar, to the United States at a relatively low tariff.
At present, sugar being sold at the world market is priced lower than the locally produced sugar due to the high production cost in the Philippines.
Sugar production in countries like Thailand is also highly subsidized by their government that's why they can afford to sell the sweetener at way lower prices.