RP sugar assured of US market for 7 years

The United States will continue to source 13.5 percent or even more of its annual sugar import requirements from the Philippines at least for the next seven years at a premium price, a move that is expected to rake in for the country at least $54 million in foreign exchange revenues every year.

US President George W. Bush has just signed the Farm Security and Rural Investment Act of 2002, which among other things, extended the US sugar program, through the 2007 crop year.

The Philippines is the third largest quota holder under the US sugar tariff rate quota program, with a share of 13.5 percent, next only to the Dominican Republic and Brazil. There are around 40 quota-holding countries, all identified in the law by name.

For this cropyear, the Philippines is shipping out 137,353 metric tons out of total US sugar imports of over one million metric tons.

Under the law, the loan rate remains at 18 cents per pound for raw sugar equivalent for sugarcane and 22.9 cents per pound for refined beet sugar, but the US agriculture secretary has the discretion to reduce the rates for US sugar producers if support for foreign competitors is reduced beyond that required under the World Trade Organization agreement on agriculture.

This means that local sugar producers will get a price of 18 cents per pound for sugar shipped to the US under the quota system, compared to the current world market price of only six cents per pound, or a 12 cents per pound premium.

The new law makes only one change in the way the quota is established and administered. It says that on or after June 1 of each year, the US Trade Representative, in consultation with the Secretary of Agriculture, shall determine the amount of the quota of cane sugar used in that cropyear by each of the 40 quota-holding countries.

Local sugar industry officials said that in case a quota-holding country fails to utilize its quota, the USTR may reallocate the unused quota to other quota holders either pro-rata (according to share) or depending on shipping patterns.

They noted that the new US law is very good for the Philippines. "It also shows that even the US recognizes the fact that their farmers need to be protected. The US government also acknowledges that the cost of producing sugar is much higher than world market prices," Philippine Sugar Millers Association (PSMA) executive director Jose Ma. Zabaleta commented.

The US government will keep domestic sugar prices high and avoid loan defaults and overproduction by controlling the amount of sugar that its domestic producers can sell. By Aug. 1 of each year, the US agriculture secretary must estimate domestic consumption, production, carry-in stocks, ending stocks, and imports. These numbers will be estimated again at the beginning of each quarter. The secretary will then limit the marketing of sugar to keep prices high enough for American farmers to ensure that loans will be paid back.