US Sugar Program

THE United States is a premium market for Philippine sugar. Sugar prices in the US last May was P55 per kilo while the sweetener sold only at P23.56 per kilo in the world market. Thus it makes sense that Philippine producers would want to sell some of their sugar to the US market instead of to the world market.

Last year, the country’s sugar exports to the US amounted to $263 million or P11 billion, according to US Agricultural Counselor Philip Shull during his visit to Bacolod last February. The country is also poised to earn approximately the same amount from sugar exports to the US this year.

With P11 million in foreign earnings at stake, no wonder that sugar leaders of the country regularly go to Washington to lobby for the retention of and, if possible, increase in, the volume of sugar which the Philippines can export to the US.

SRA chief Gina Martin headed the Philippine Sugar Mission to Washington last May. With her were NFSP president Enrique D. Rojas and vice president Jaime G. Golez, Confed president Marcelino Aganon, Jr. and Negros-Panay head Raymond Montinola and PSMA’s Dong Varua.

The annual sugar mission to Washington is no junket. The Philippine sugar delegation goes there to personally assure US officials that the Philippines is ready, willing and able to supply sugar to the US market.

The Philippines has access to the US sugar market, thanks to the US Sugar Program, a major component of the US Farm Bill which will soon be deliberated on in the US House of Representatives whether it should be renewed or not.

One of the most contentious provisions in the Farm Bill is the US sugar program which has polarized the US Senate.

The Farm Bill as a whole gained Senate approval last month on a vote of 64 – 35 but the sugar program had a more difficult time getting the senators’ nod. On the vote over the proposal to continue the sugar program without changes, 50 senators supported the program while 46 opposed. Whew! A very close call.

Under the sugar program, at least 85% of the sugar sold in the US should be supplied by American producers while the remaining 15% should be sourced from imports. However, such imports should not be less than 1.256 million short tons (1.13 million mt), in compliance with its commitments under the World Trade Organization agreements.

The US Department of Agriculture estimates the projected sugar consumption against the projected US sugar supply, both from sugarcane and sugar beets. The US has traditionally been a net sugar importer. Shortfalls in supply will then be allocated by the office of the US Trade Representative among sugar-producing countries, including the Philippines.

Each country’s allocation for export to the US is announced after October 1, the start of its crop year. By February or March, the USDA computes actual production vs. estimates and makes the necessary adjustments. If production falls below estimate or if other quota-holding countries fail to deliver their allocations, the USTR announces additional allocation by April.

It can be recalled that the Philippines received last April an additional 75,540 mt allocation from the US on top of its regular quota of about 137,000 mt.

Another feature of the US Sugar Program is the financing which allows US sugar producers to avail of crop loans against their sugar production at a guaranteed price per pound of 18.75 cents (P866.25 per 50-kilo bag) for raw sugar and 24 cents (P1.108 / bag) for refined sugar.

The key phrase is “guaranteed price”. If sugar prices fall below the guaranteed price, they can just pay the government with their sugar based on the guaranteed price without needing to repay their loans in cash.

If sugar production exceeds demand, the government is mandated under the sugar program to buy the excess sugar and sell it to ethanol producers – even at a loss - to ensure that sugar prices remain stable.

Won’t it be more fun in the Philippines if we also have a similar sugar program?

(For suggestions and reactions, email bbacaoco@yahoo.com.)