Hoarding behind high sugar prices — traders

Food exporters suspect hoarding of sugar as the main reason for the rocketing price of the commodity and called on government to immediately step in to help avert the collapse of the food export industry due to possible supply manipulation.

Roberto Amores, president of the Philippine Food Exporters and Processors Organization (PhilFoodex), in a statement provided to PhilExport News and Features, traced the very serious sugar crises not on inadequate supply, but a “price issue caused by illegal hoarding by profiteering unscrupulous merchants, based on Sugar Regulatory Administration (SRA) data we obtained.”

In the SRA record, given the demand of 2.31 million metric tons (MT) against an estimated stock of 2.6 million MT until end-August, the country, a net exporter of sugar, will have a carry-over of 290,000 MT for the 2010 to 2011 crop year starting September. Despite this adequate inventory level as of January 2010 according to the Bureau of Agricultural Statistics, the price of refined sugar stood at an average of P52 per kilo up to P60 per kilo as opposed to last month’s P45 per kilo and year-ago rate of P36 per kilo.

Such findings disprove the results of an earlier dialog between SRA Administrator Rafael Coscoluella and an alliance of food manufacturers, where Coscoluella traced the crisis to the surge in world prices of the sweetener.

Amores, also the vice president for agriculture of the Philippine Chamber of Commerce and Industry (PCCI), said that the inadequate supply has influenced the soaring sugar prices. He noted that with prices now hovering between P52 and P60 per kilo, sugar-based food manufacturers are in a losing proposition against more competitive Asean neighbors such as Thailand, Malaysia and Vietnam.

To save the exporters, Amores, also the Food Trustee of the Philippine Exporters Confederation, Inc. (PhilExport), again appealed for the re-allocation of the “D” sugar to food exporters equivalent to two percent of domestic production, following the guidelines set by SRA.

The “D” sugar allocation of the export sector was terminated late last year by the SRA when domestic sugar prices started going up.

“Continued access to the competitively-priced ‘D’ sugar is critical to food processors and exporters, as sugar imports are levied a duty of 38 percent (a protective tariff which rewarded until now the inefficient Philippine sugar industry sector),” said Amores. “Without the ‘D’ sugar, food processors and exporters will be colossally disadvantaged and uncompetitive, since sugar as raw material for sugar-based processed products account for 30 to 40 percent of production cost.”

Another urgent action that Amores sought is the immediate duty-free importation of refined sugar for use by domestic manufacturers and food processors. He further pressed for the following interventions: allow exporters to draw from the strategic reserves that the SRA will later replace through import substitution while waiting for the imported sugar; government to check and monitor inventories of sugar millers and traders to determine if there are any physical hoardings (or unlawful stocking), believed to cause an artificial situation that could create an avenue for sugar prices to increase uncontrollably; and reorganize the SRA to include proper representation from the private sector coming from food processors or manufacturers and PCCI.

“Now a national crisis, the unabated surge in sugar prices is not only hurting food manufacturers but ordinary household consumers as well, many of whom have not yet recovered from the debilitating effect of typhoons ‘Ondoy’ and ‘Pepeng,’” Amores said.

Amores expressed fears that if the high cost of sugar persists, many of the local food manufacturers, most of whom are still suffering from the effects of the lingering global economic crisis, may be forced to close shop and mass lay-off of workers. He noted that even the consuming public is already hurting from the worsening situation.

Interviewed separately, Sergio Ortiz-Luis Jr., president of PhilExport, said that stakeholders are being misled in finding the culprit for the price increase in sugar and sugar products, including bread.

“It is plain and simple that SRA is to be blamed for the crisis we are in. It has turned to be a scourge to the Filipino people,” Ortiz-Luis Jr. stressed.

SRA is supposed to improve the competitiveness of the sugar industry and its workers. And yet, even with over several decades of forced support through SRA, the industry has stagnated.

“The industry is still uncompetitive. And so is its labor, specifically the sacadas who have not improved their lot,” explained Ortiz-Luis Jr. “Meanwhile, this situation has stunted the growth of the sectors in the sugar supply chain. Worse, it is now hurting Filipino consumers who have to carry the brunt of the SRA policy.” –Daily Tribune