Supply and demand problems, from molasses to chicken 

Supply and demand. Supply and demand. It’s the most overused phrase in economics, equivalent perhaps as when your beloved softly whispers “I love you” in your ears and you echo the words right back at him or her. It’s not surprising though because this three-word term provides the answer to every economic puzzle – supply and demand, I mean; not I love you.

Why are vegetable prices so high now? Supply and demand.

Why are oil prices skyrocketing? Supply and demand.

Why are wages so low? Supply and demand.

It’s true now as it was true ages ago and it’s perhaps the reason why the Victorian era British philosopher Thomas Carlyle came up with the famous humorous quote: If you teach a parrot the terms “supply and demand,” then you’ve got an economist.

This age-old comical glib comes to mind now as all eyes and ears are on the developments surrounding the rice crisis of our time, supposedly caused by an artificial shortage created by misbehaving rice hoarders who want to keep prices high by curbing supply.

But did you know that aside from rice, supply and demand problems are also affecting many of our local industries – from molasses to chicken and many other commodities?

Ethanol producers on a bitter fight for molasses

The Ethanol Producers Association of the Philippines (EPAP), for instance, is having a hard time securing molasses for their bioethanol production because the Sugar Regulatory Administration (SRA) does not allow the regulated importation of the product.

Molasses, a by-product of extracting sugar from sugarcane, is used by distilleries to produce ethanol.

It’s a problem that’s been hounding the industry for years now but in a recent chat, EPAP chairman Gerry Tee hopes that while the Marcos administration has put the spotlight on the rice industry, it would also take a serious look at the plight of ethanol producers.

Ethanol producers lament that they are not allowed to import molasses for biofuels even if local supply – approximately 1.1 million metric tons (MMT) – is not enough to meet the demand of 1.5 MMT per year. There is a shortage of 500,000 MT.

But the SRA does not allow regulated importation of molasses for ethanol production, saying that the Biofuels Act of 2006 mandates that all liquid fuels sold in the Philippines must contain locally sourced bioethanol.

However, EPAP argued that it is only the raw material, which is molasses, that is imported; the biofuel itself is still locally produced.

The situation has been a source of frustration for ethanol producers.

Tee believes the SRA may not be able to appreciate the plight of ethanol producers for the very simple reason that it is mandated to promote the growth of the sugar industry and whose board includes sugar millers and planters.

Naturally, he explains, sugar industry players will benefit when imported molasses do not compete with their produce and of course, when prices go up. Molasses is now at P15,000 per metric ton from just around P2,800 in 2011.

EPAP believes that instead of the SRA – which could inevitably be beholden to the sugar industry – the ethanol industry is better off under the regulatory supervision of the Department of Energy, whose mandate is to ensure energy security in the country, which ethanol producers can play a big role in.

Biofuels Act

The landmark Biofuels Act, which mandates that all liquid fuels for engines sold in the Philippines be blended with biofuels, is a good law and if implemented well, translates to environmental and economic benefits.

A study conducted by the University of the Philippines Los Baños showed that from 2019 to 2020, the Philippines has so far avoided 268,091.15 carbon dioxide equivalent (CO2e) per year, which translates to savings of P683.63 million – which could mean the cost of long-term damage on agriculture, transport infrastructure, etc., if greenhouse gas emissions were not avoided.

Local vs imported chicken

Now while ethanol producers need imported molasses, the situation is different for the local chicken industry.

Competition from cheap chicken imports continues to hurt poultry players because even big food businesses in the Philippines are turning to imports.

But this is not necessarily good. Some imported chicken meat, we hear, are usually injected with more water and additives to make them plump and heavier to adhere to standard size and weight when shipped. British newspaper The Guardian published an investigative report on this years ago.

The downside of this is that these chicken parts inevitably lose their flavor when cooked in hot frying oil.

On the other hand, local chicken remains fresh and tastier because they are not injected with as many additives as a product may need when it needs to be shipped.

Could this be the reason why a Filipino chicken favorite has been the subject of complaints online as consumers noted that chicken servings have become smaller in size and that they are not as juicy as they used to be?

We don’t really know for sure but I’m sure this chicken favorite and perhaps other chicken chains in the country can support our local producers if they buy domestically instead of importing chicken from abroad.

Competence

So yes, clearly, some of our local industries are in big trouble. They badly need all the support they can get. But why does it sometimes feel there aren’t enough competent policymakers and regulators helping them?

The answer is  simple – supply and demand. But that’s another story.

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