Arroyo issues 2 EOs to provide relief to local sugar industry

President Arroyo issued last Monday two executive orders (EO) designed to provide relief to the sugar industry which is being weighed down by declining millgate prices.

The first EO authorizes the state-run National Food Authority (NFA) to buy from sugar producers at least 70,000 metric tons (MT) of sugar at the floor price of P700 per 50-kilogram bag.

The second EO raises the tariff on imported sugar-laden premixes and other sugar containing products to 65 percent from three percent. These commodities are being used by the beverage manufacturers as raw materials for their products.

Sugar Regulatory Administrator James Ledesma said the sugar to be acquired by the NFA will come from "C" or reserve sugar representing 20 percent of total sugar production. This is equivalent to 70,000 MT or 1.4 million 50-kg bags of sugar.

"The producers still have the option as to whether or not they want to sell to NFA or not. The price offered by the NFA could be considered as the floor price and it gives producers an alternative market for his quedans," Ledesma said.

The NFA’s intervention in the market should last for about a month and with the benchmark price of P700 per bag, the SRA believes this will be enough to siphon off excess sugar as sugar traders compete for the limited volume in the market, and raise sugar prices again.

"The P700 mark is the psycological barrier that we want to break to stabilize local sugar prices," Agriculture Secretary Luis Lorenzo Jr. said earlier.

The sugar industry lobbied to have the NFA bail it out as domestic prices hit rock bottom last Feb. 5 as millgate prices of sugar plunged to P638 per bag.

While prices have picked up, the rates are still low compared to an average of more than P800 per 50-kg bag in previous years.

"With the signing of the EO, prices are expected to firm up and continue its upward trend," Ledesma said.

The second EO was signed by the President after the Tariff Commission approved the petition of the Department of Agriculture to reclassify imported premix juices as sugar and raise tariff rates to 65 percent from the current rate of three percent.

"The EO will plug the loophole which was used by the beverage manufacturers and other industrial users in the past to bring in raw materials at very low tariff rates. As a result, demand for domestic sugar from these manufacturers fell and subsequently brought down the prices of sugar at millgate," Ledesma said.

Ledesma said imported premix products used as raw material in making beverages like instant tea, powdered juice drinks, or sugar-based foods with vitamin and mineral content, contain 65-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. – Rocel Felix