SAP defends SRA - 3

The basis for the argument of the Sugar Alliance of the Philippines in its defense of the Sugar Regulatory Administration is the 2014-15 country's production of 2.5 million metric tons. As I cited last week, this figure contradicts the official production data that SRA released. The official production is only 2.37 million tons.

Thus even if the SRA had allocated all sugar to the domestic market, there was just hardly much in the country. Traders and SAP know this to be the real reason for the high price for producers. They could not bid lower for the supply is low. That is just a simple matter of supply and demand.

In a sense, there could have been no need for the conversion from “D” to “B”. Compounding the planters' problem is that the conversion process works against the small planters.

For instance there was a deadline – August 28, 2015, just 24 days after the Sugar Order was issued for conversion of “A” to “B”. It is understandable to have the deadline because in truth the market was already being drained of supply.

The question is: why was there a deadline for the planters and no deadline for the traders who are keeping their “D”? The deadline puts pressure on the planters but without a deadline, the traders can continue to play the market of which they are well informed.

These traders had already bought the “D” at low price. With the conversion for which they are not pressured to sell, they can dispose of their sugar at any time at what some producers claimed “double the price.”

Did SAP complain of this anti-producers bias? If not, why not? Although I got information of reasons for the silence of SAP, I will grant that to the readers and the small and even big planters to ask their associations. Its defense of the SRA policy in this issue speaks for itself.

What the SAP did not tell us is that out of the 2.37 million tons production, the ethanol plants used 4,926 metric tons while the food processors got 6,146 tons and thus significantly affected public perception to accept the SAP claim that there is enough sugar in the local market.

That the domestic market is already drained of supply is clear with the new SRA estimate of the country's production for this crop year (2015-2016). It expects only 2.27 million tons, another big drop from last year's 2.37 tons that SAP claims to be 2.5 million tons.

I think that this crop year's estimate, although already low, is still optimistic considering that we are expecting a projected two-year drought and there are very rare irrigation facilities for the industry. Thanks to CARP most of the sugar farms are small and cannot afford these facilities to mitigate the impact of months of low or no rainfall.

Sure there is the newly passed Sugarcane Industry Development Act but the Supplemental Budget that is hoped for to bring in the money early was not even acted by Congress, if a bill was filed at all. The P2-billion budget will still come by next year at the height of El Niño.

Information says that SRA does not envision any importation for local consumption for next year, even by one of the biggest industrial user although food processors have already secured a permit to import just a little above 41,000 tons.

In the face of its own data, why does SRA say that it will export 142,000 metric tons of our sugar? If we do not have enough, why export at all? How can SAP or SRA explain these paradoxes – we don't have enough sugar, there will be no import but we will export 142,000 to the US market? Has not the “A” sugar been ordered converted to “B” and in this crop year there is no more “A”?

It appears the reason there was no deadline for traders to convert their “A” to “B” is that they will export this sugar. If export will be allowed, why did SRA pressure the planters to sell and without telling them their “A” sugar could be exported after all? Is it because SRA wants the traders to corner and consolidate enough sugar to fill up their export commitments? Is not SRA depriving the producers of their export rights? The US quota is a share of the entire industry, not just of the traders but SRA is taking this out.

Does one smell something rotten? Let's wait for developments.*

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