Sugar

Over breakfast at the Tuesday Club this week, Agriculture Secretary Art Yap redeemed this administration from the impression that it does not know what it is doing on the sugar situation. Secretary Yap confessed that he was surprised when he read newspaper stories quoting DTI Secretary Peter Favila saying government-to-government importations will be immediately resorted to bring down domestic sugar prices.

Secretary Yap called me last Wednesday to further explain that there was apparently a difference in interpretation on what constitutes g-to-g deals between him and Mr. Favila. To the DTI secretary, even private sector importation that passes through NFA and avails of duty free privileges is g-to-g. That’s weird. G-to-g requires another government as a counterparty and it must be a totally government financed transaction.

In any case, Art Yap may be a lawyer rather than a former banker like Favila, but Art knows his Economics much better. Art explained that importation is always a theoretical option in bringing down prices because it will increase supply. But he knows too that it is not an option that can be quickly availed of this time.

Art knows the demand and supply situation is rather tight in the world sugar market these days and prices are too high for the landed cost to make a difference in lowering domestic market prices. Maybe, Art said, we can import a few months down the road.

Besides, Art said, we are in the middle of the milling season and supply is getting into the market now. Art does not want to undercut the millers by importing abruptly. Art thinks the policy of continually sacrificing the farmers in favor of urban consumers is counterproductive to our effort to grow enough food for everyone.

Art asked for a piece of paper and a ball pen and started to scribble out some figures for me. In sum, he scribbled that the price of domestic refined sugar is now P2,200 per bag which comes out to about P44 per kilo, a bit cheaper than the P50 world market price.

Art then explained that we classify our sugar produce into A (for US quota); B (for domestic); C (for domestic reserve) and D (for world market). We have enough supply in the country, Art emphasized. Rather than import right away, what we must do to bring prices down, Art said, is to release our domestic reserve. We can import later to replenish it if conditions are right. Art also wants the Sugar Regulatory Commission to set aside about 100,000 bags (of 200 kgs) for the poor communities.

Art’s explanation was a far cry from the irresponsible challenge of DTI’s Favila to the sugar millers to just export all they have and government will take care of domestic consumers through g-to-g contracts. Nakakahiya! Favila should learn to ask intelligent questions from those who know the score before he opens his mouth the next time.

Ate Glue’s administration already has a bad image for being corrupt. Must it also be thought of as being utterly stupid? –Bo  Chanco, Philippine Star