The SRA issued recently Circular Letter 24 of Sugar Order 6 directing sugar traders to first fulfill the quota obligations to the US before they are permitted to start importing sugar to replace the additional volume that will be shipped to the US.
The United States Department of Agriculture has raised the Philippines’ sugar quota this year to 216,438 metric tons (MT) from 137,353 MT or an increase of 79,085 MT.
Based on the 2005-2006 sugar production program, the country’s sugar harvest is projected to hit 2.18 million MT, just enough to meet the original export quota of 137,353 MT, the domestic requirements, and a little surplus.
The SRA said the increased quota has resulted in a deficit of 50,000 MT which Malacañang addressed last month by approving sugar imports through a counter-trade program.
This means the volume coming in will be duty-free. SRA consultant Archie Amarra who is also executive director of the Sugar Masterplan Foundation noted that the agency’s directive should shake off the reluctance of traders to comply with the US quota.
The SRA had observed that towards the end of February, there was a slow down in the movement of "A" sugar or US export quedans for shipment, thus the US export program was being threatened. "We have to protect our reputation as a regular and stable supplier of sugar to the US.
Not only do they give us premium prices but failure to comply with the quota for the year will most likely mean that our quota next year will be reduced substantially," said Amarra.
The traders’ reluctance is due to the marginal revenue that they will get from exporting the additional volume to the US compared to their projected profits by bringing in the duty-free sugar imports approved previously by Malacañang.
"Actually the landed cost in the US and the duty-free imports are almost the same but then traders will gain by putting a margin on the imported sugar to be distributed in the local market," said Amarra.
The export-import program was thus designed to connect additional US exports to the planned imports.
To support the program, the SRA also issued Sugar Order 8 which placed deadlines on the verification of the "A" quedans for eventual shipment and reiterated the SRA policy, that for this crop year, no US export "A" quedan will be converted to domestic "B".
The intention here is to flush out all the available "A" quedans intended for the US.
The SRA is confident that with the proper implementation of its export-import program, the Philippines will be able to fulfill its quota obligations to the US this year.
On the other hand, duty-free importation of refined sugar serves as an incentive to the exporters for them to ship out more to the US.
The imports are scheduled to arrive in June when the bulk of the milling would have been completed, and if they arrive earlier, will be classified by the SRA as "C" or reserve sugar. Its distribution will be put on hold so as not to dampen domestic sugar prices.
The SRA order also calls for a special lien to be charged on the imports, and the proceeds will be distributed to all sugar producers.