Gov’t readies bailout plan for sugar sector

Malacañang is preparing a bailout plan to avert a serious crisis in the local sugar industry saddled by low mill gate prices.

Agriculture Secretary Luis Lorenzo Jr. said Malacañang is set to issue an executive order (EO) directing the National Food Authority (NFA) to buy from sugar producers at least 70,000 metric tons (MT) of sugar pegged at P700 to P720 per 50-kilogram bag.

"We are awaiting the approval by Malacañang of an EO that will enable the NFA to intervene in the market for about four weeks by buying sugar at the benchmark range of P700 to P720 – it is the psychological barrier that we want to break and hopefully, will stabilize prices," Lorenzo said.

The volume to be acquired by NFA will eventually be distributed, possibly to the local beverage market.

The move, according to industry sources is a result of the intense lobbying done by local sugar producers who sought President Arroyo’s help to arrest declining sugar prices.

Even before the EO’s issuance, mill gate prices of sugar has reportedly picked up from the low of P620 since the start of the milling season last September to at least P685 to P715 per 50-kilogram bag last week.

Sugar producers are producing about 90,000 MT of sugar per week or about 360,000 MT per month but consumption is flat at 150,000 MT.

Aside from the flat demand, sugar producers are also blaming the technical smuggling of sugar and the weak prices in the world market for the slide in local sugar prices.

To address the industry’s concerns, the Department of Agriculture (DA) already asked the Tariff Commission (TC) to reclassify imported premix juices as sugar and raise tariff rates to 65 percent from the current rate of three percent.

"We hope the tariff loophole will limit the entry of sugar-containing products that are coming in tax-free or at very low import duties. This is giving the local sugar industry unfair competition as this is causing the decline in sugar prices," Lorenzo said previously.

Sugar Regulatory Administrator James Ledesma said imported premix products used as raw material in making beverages like instant teas, powdered juice drinks, or sugar-based foods with vitamin and mineral content, contain 65 percent to 95 percent sugar by dry weight and should thus, be classified as refined sugar.

Data show the country imports about 80,000 metric tons of premix juices a year. An additional 40,000 to 50,000 tons of sugar, darkened with carbon, are imported by softdrink makers.

Aside from the proposed reclassification of premixes, excess domestic production is being exported. About 40,000 MT of sugar were already shipped to South Korea last month. An additional 30,000 MT is bound for China in the next few weeks.