‘Market failure’ warrants gov’t intervention to upgrade sugar production

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By Luisa Maria Jacinta C. Jocson, Reporter

SUGAR FARMING and milling practices need to be overhauled because yields are well below those of other countries, the head of the agriculture industry chamber said, with an analyst saying that the sector’s current predicament constitutes “market failure.”

“Other countries have great yields. There is room for improvement in the productivity of our yield per hectare. To do that, you need proper irrigation… varieties, and fertilizer utilization. We need better farming methods,” Philippine Chamber of Agriculture and Food, Inc. President Danilo V. Fausto said by phone.

“Some countries are able to more than double our current production yield. We can also do that if we improve the efficiency of our production,” he said. 

Mr. Fausto supports sugar imports allocated exclusively to food processors that intend to export their production.

“Our exporters cannot compete in the market (for) chocolate, candy, bakery goods, for the simple reason that sugar is so expensive. If we allow imports of sugar (for food processors), that would be better. It cannot be open-ended that anyone can import. It needs to be selective,” he said.

“Before we open up imports, we have to support our production efficiency, mechanization, fertilizer utilization, and good varieties of planting…if we can increase our yield through new methods, we can reach local self-sufficiency and we can (even) export. We will go for imports only for the use of (exporters). We are fighting in the export market. We can’t compete because of high sugar prices,” he said.

Roy S. Kempis, a retired Pampanga State Agricultural University professor, said that sugar production requires government intervention because the necessary corrective measures will be expensive and time consuming.

“Putting up sugar mills to run again and constructing new ones take time,” he said in a Viber message.

According to Mr. Kempis, the government must jump-start production by upgrading sugar mills and providing more land for sugar farmers.

“There have been massive market failures of late. Government intervention is needed to underwrite restarting mothballed sugar mills and/or constructing new sugar mills; and creating an environment where sugarland produces cane again,” he said.

He called for “long-term planning, investment, and incentives” to ensure that “prices are attractive for private investors and planters and land owners. This can be done with public policy improvements, new or strengthened laws, and no-nonsense enforcement.  All these are important,” he added.

Mr. Kempis said that the government must move forward with a “holistic and unifying goal” to achieve food security.

The Palace was caught up in the industry’s production crisis last week when Sugar Order No. 4, issued allegedly in the President’s name, called for the import of 300,000 metric tons of sugar. The Palace has since denied that President Ferdinand R. Marcos, Jr. issued the order, resulting in the resignation of an undersecretary at the Department of Agriculture (DA).

Mr. Fausto welcomed the recall of the order, saying that imports would have coincided with the milling season, depressing prices.

“If you import during the milling season, it will flood sugar (onto the market) and displace our farm workers. We have about 700,000 farm workers and 5 to 6 million indirect industry workers. It will have a big effect,” Mr. Fausto said.

“Mr. Kempis said that SO No. 4 will address a short-term problem, which is to buffer supply in the domestic market to stabilize prices.

“The local production of sugar needs to thrive. But this is tricky since production can also be short-term; but granting that sugarcane production increases by expanding and reopening sugarland with harvests within 9-11 months, what mills will produce sugar from this increase in cane production? Several important and strategically located mills have stopped operations or closed shop because of production, supply, demand, price, labor and other issues,” he said.

“Starting September to December or January 2023, cane harvesting will take place. But we do not know if this is enough. …we are also uncertain if indeed we have a sugar supply problem. Government data are not reliable, and perhaps SO No. 4 was drafted (based) on wrong or distorted data,” he added.

Mr. Kempis said that the government should “swoop down on accredited and non-accredited warehouses to physically count and determine sugar supply on the ground.”

“It may happen that hoarding is being done. And there are sectors who believe that raiding them now will reduce prices of sugar tomorrow,” he added.

Agriculture Undersecretary Leocadio S. Sebastian, the official who issued the sugar order, resigned last week, saying he was under the mistaken impression that he had been “vested” with authority to decide on imports. “It has become clear that the same was not in keeping with your administration’s desired direction for the sugar industry,” he said in his resignation letter.

Undersecretary and DA Spokesperson Kristine Y. Evangelista told reporters on Friday that the results of the investigation remain pending.

“Meanwhile, we are continuing (to manage) the supply situation because we need to make sure there is enough sugar for our citizens,” she said.

“We had an early harvest and resumed the milling season in August. That will add to our supply. Monitoring and inspection of warehouses is also still undergoing,” she added.

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