AN economist-lawmaker said while most price increases are “beyond our control due to global conditions,” the prices of sugar “are almost completely within our power to lower.”
House Committee on Ways and Means Chairman Joey Sarte Salceda made the statement over the weekend in response to the October 2022 inflation report, which shows the country’s general price levels to be the highest since November 2008.
According to Salceda, high prices of sugar “kill domestic jobs more than they help farmers.”
“High corn, fuel, and electricity prices are primarily a matter of global conditions. But for sugar, because of our longstanding policy of misguided protectionism, we have it coming,” Salceda said.
The solon also warned that “the problem with high sugar prices isn’t just that consumers are bearing the brunt of it. It’s that Philippine industries consume more sugar than consumers do. And they’re in trouble if we don’t sort the situation out.”
“Some 66 percent of all sugar demand is as input to other Philippine industries. Only 34 percent is consumed in final form. So, very expensive sugar prices kill Filipino jobs,” Salceda said.
“The top 3-in-1 coffee brand in the country, Kopiko, is imported, because our domestic manufacturers can’t compete. Homegrown brand C2 is already being manufactured in Vietnam because Philippine sugar is expensive,” he said.
Costing jobs
Salceda warned that the country’s “structural sugar issues” is already costing jobs.
“The next thing you’re going to kill is domestic fruit canning and manufacturing, which is a major jobs provider in Mindanao. You’re going to kill softdrinks makers, where as much as 18 percent of costs are sugar. Alcohol makers, some of the only true global Filipino brands, use a lot of sugar—as much as 9 percent of costs, based on IO tables,” he added.
“And high sugar prices, because they are inputs to other sectors, are definitely affecting the prices of bread, softdrinks, alcoholic drinks, dairy, and other processed foods.”
Salceda cited the 2018 240-sector input-output tables by the Philippine Statistics Authority, showing some 102.5 billion in sugar is consumed by other sectors as an intermediate input, while only 51.9 billion is used as a final good.
Salceda also stressed that “out of all the goods in the October inflation report, sugar represents the highest year-on-year increase at 34 percent. That is a form of self-harm or self-sabotage when global prices have already stabilized at more or less their 50-year average of 17-18 cents per pound.”
According to the Intercontinental Exchange (ICE), the global price of sugar is now at just around P24 per kilo, while retail prices in the domestic market fetch as high as P120 per kilo, according to the lawmaker.
Industrial imports
Meanwhile, Salceda reiterated that allowing industrial users to import sugar is “the most immediate way to address some parts of food inflation.”
“I’ve talked to farmer groups and they complain that their problem is input costs. High fertilizer and farm fuel costs are major issues. Among milling companies, energy costs are also the issue. I already have a proposal to allow industrial users to import another 400,000 MT of refined sugar. If we auction those slots off, we could be earning as much as 12 billion pesos, which we could provide to farmers and millers as direct subsidies,” he said.
“I have also alerted the government to the fiscal risks of expensive sugar. We were supposed to collect some P2.8 billion in sweetened beverage taxes every month. That’s not going to happen if bottlers keep closing down plants due to lack of available sugar inputs,” he added.
The lawmaker also urged the Department of Trade and Industry and Neda to apprise the government of the implications of the current conditions.
“Is there a sugar shortage among our industrial users, yes or no? And how much is the shortfall? So that the administration can make a decision that works for both industry and farmers based on that matter,” he said.
“Otherwise, industrial users are going to have to find a way to get their sugar, one way or another. They will either manufacture abroad, or smuggle sugar here. Either way, we’ll see jobs killed,” he said.
Meanwhile, Salceda clarified that his proposal to allow the importation of some 400,000 MT should cover the end of SO2 until the harvest season in 2023.
“Likewise, my proposal to raise revenues from imports is NOT out of tariffs, but out of auction fees—could be as much as P30/kilo, which will still result in prices that are lower by as much as 33 percent from domestic retail prices,” he said.
According to the lawmaker, sugar is now the commodity with the highest inflation rate—34 percent—among all commodities in the CPI.
“Sugar prices in the world market—P24/kilo according to the Intercontinental Exchange—are as much as 1/4 the price of domestic retail sugar. Even if sugar in the Philippines were enough—and long-term figures indicate that we have a structural deficit of around 200,000 MT—our domestic industries are still constrained from growing due to high domestic sugar prices,” he added.
“High sugar prices constrain us from having a big food export sector. Sugar is a major input in everything from dried mangoes to canned pineapples,” he said.
The lawmaker said industrial users have as little as 4 to 7 days of inventories, and manufacturing plants are at risk of closing down due to lack of available domestic sugar.
“Moving forward, the national conversation must go beyond whether there is enough sugar to meet our demands. Domestic availability is a limiting constraint, and unless we are able to lower sugar prices, our food manufacturing sector will stagnate if not decline,” he said.
“Food manufacturers will get the sugar they need, one way or another. If they can’t get it here, they will either smuggle sugar or they will ship jobs abroad by setting up plants there. That is already the case with many of our homegrown brands,” he added.