Powerful SRA - 2

The primary purpose of the Benitez bill is to cover all products derived from sugarcane, the reason that the title of the bill uses the name of the plant (sugarcane) rather than the product (sugar) as the subject of the measure. It speaks not only of food but also of energy and the control of these products from the time it comes out of processing to where it will go. This is the essence of classification, the power vested in the SRA.

Today SRA controls only the sugar which is food, but under the bill it will have control over molasses which is the basic fodder for alcohol production for ethanol and hence to energy products, like motive fuel.

The quedaning of molasses insures that ethanol plants have a share in the molasses. Remember that the initial ethanol project in San Carlos City slowed down due to lack of canes. There was a competition for canes with the mill but the mills won because they offered better prices. This was one of the reasons that there was a proposal for cane purchase but the planters rejected this scheme. Let’s put that for another discussion.

Once the Benitez bill becomes law, the SRA will quedan, meaning determine how much of the molasses goes to ethanol and how much to others. While competition for the best price can still prevail nevertheless the allocation of the molasses can lead to another “composite” pricing scheme. The ethanol plants can determine their buying price (cartelization by whatever name) since the molasses is intended solely for them. The planters will just have to balance the average price by the ethanol plants and the other molasses buyers, usually exporters.

The quedanning of molasses has nowhere to go but this path; otherwise what is the point? As with sugar quedaning for domestic, US and world market (whatever happened to reserve?) so it will be for molasses.

Thus there is additional power of SRA over another sugarcane product. This new power is vital to the “main focus of development of the sugar industry” which are “the transformation of sugarcane industry from the limited ‘raw and refined production’ into a diversified industry producing not mainly raw and refined sugar but also power, waste disposition and other possible products primary through integration of by-products production with sugar processing.”

As I wrote yesterday, the Benitez bill is on diversification of the products from sugarcane and in its mind the control by SRA is necessary. This is an arguable thesis but considering the past history of product diversification in the industry and the new realities, like ethanol as a compulsory motive fuel mix, the additional power to SRA might be necessary.

On the other hand, is this not a restraint to free enterprise? Perhaps, so let’s wait for the final version as this added power of the SRA is not clear in Villar’s bill.

The registration of all sugar warehouses and storage facilities with the SRA is important for the monitoring of sugar stocks and movement. There was debate in the papers last week of actual sugar stocks, whether in storage or along the supply pipeline. The debate places into question the statistics in the SRA website. Statistics can manipulate public opinion so that if indeed such registration is important what is equally or more important is that the public will have free access to this statistics to prevent stock and price manipulation.

The Benitez bill mentions the establishment of economic zones and with that goes incentives and privileges to promote economy of scale. If CARP is to succeed in the sugar industry, these eco-zones and the proposed block farming will enhance our competitiveness as this will utilize schemes to achieve the economy of scale. It has been shown by almost every study on sugarcane productivity that the larger the farm, the higher the yield.

This provision strengthens the hand of SRA some more. The agency has already started block farming and reported doubling of production which is more than a miracle. It is mysterious, in fact. Nevertheless, it cannot be denied that farming in a co-operative way as I learned being done by agrarian reform beneficiaries in La Castellana is the way of the future.

These added incentives to SRA’s program are a welcome approach but more than the SRA, the effort must be institutionalized by the farmers themselves. We had sad history of this scheme since 1953, wasting millions in the process.

Let’s continue with the expanded powers of SRA next week.*

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