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Bacolod City, Philippines Thursday, March 29, 2012
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TIGHT ROPE
WITH MODESTO P. SA-ONOY

Sugarcane Act

TIGHT ROPE
WITH MODESTO P. SA-ONOY

Rep. Alfredo Benitez appears to have abandoned his earlier bill on the sugar industry and is now planning to file the Sugarcane Act. This shift in the title of the bill is significant. It will concentrate on the raw materials rather than the end product. How the raw material (cane) can be of higher value without raising the value of the end product (sugar and ethanol) is unclear but little logic says that one cannot control the end product by controlling the raw materials without long term damage to the raw material.

I guess this will be threshed out but, off hand, the value of the raw product affects the price of the end product and in this country sugarcane producers are dependent on those who control sugar and if the sugarcane producers want to raise the value of their canes without affecting sugar so far we have not found a mechanism to this effect.

Sugarcane is not a producers’ market and even if there will be strong competition for canes as the sugar mills will compete with ethanol plants for their feed stock the end product can become expensive and our sugar will be unable to compete with other countries and imported and smuggled sugar.

We know that when foreign sugar comes in that would be cheap sugar because they are what are known as “dump sugar” that are very cheap. That is what Thailand and Australia are doing and as Thailand increases production to a planned 8 million tons and we open our local market with zero tariff, what do you think will happen?

Be that as it may, the adoption by the Benitez proposed bill of the Road Map of the Sugar Regulatory Administration is a right move but the producers have also come up with their own ideas on how to meet the problems of the industry and what more should be incorporated in this Road Map.

So far the SRA Road Map is clearly in the mind of the Benitez and this was expressed by SRA Chairperson Gina Martin as she explained.

The plan to make use of sugarcane for other products other than sugar is good, like production of fuel (ethanol), energy (co-generation and use of mill and farm wastes) and other by-products, like building boards, but we must go back to same situation. If the price of the cane is high, all these products will be expansive and people will prefer to import.

It is true that the price of oil is getting expensive, but oil is an international commodity that is subject to tensions in the world and when this tension, as had happened in the past, eases the price will drastically drop. One thing we must realize is that the economy of the world is dependent on oil and oil-producing countries know the danger of raising their prices too high as to cripple the world’s economy.

Some experts say that oil producers cannot raise their products beyond $150 without a risk of an armed invasion or contraction of the international economy as to force nations to scrimp or take other alternatives. OPEC found this out in the 1970s and more so now when there are dozens of technology that eschew the use of fossil oil.

Our experience with alcogas and even more recently with ethanol and hoped for foreign investors should help the planners of the industry because while on paper they look wonderful there are hundreds of imponderables that must be taken into account.

The integrated agro-industrial economic zones have greater chances of success, but how the farms and the mills can develop their new relationship will be a challenge. When the first centrifugal sugar mill was established in San Carlos in 1912 the idea is similar to the proposed economic zones but the cane producers became greedy and the idea died and adopted a new scheme that we have today with all its uncertainties.

I am certain that the industry will survive this difficulty of the zero tariffs. In my earlier column on this subject I said that only a unified sugar industry can hurdle the challenges as the leadership in the past had also overcome the problems on the 1945-1935 to the point of destroying over 800,000 tons worth of sugarcane to save the industry.

But that was the time when the government was on the producers’ side and not against them, when the government sees the industry as a vital cog in the national economy and not a threat to its political plans.

This is the danger of the Benitez bill, and, even as I write, I was informed that the Department of Agrarian Reform has started the wheels running to emasculate further the sugar industry. Perhaps by the time this column comes out, DAR’s move shall already be in the news.*

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