The Bitter Reality of the Sugar Shortage

Posted on Posted in 2022-2023

By Lance Cu Pangilinan

It is a surprise to nobody to say that we Filipinos are very fond of our sweets and is found in almost every aspect of our cuisine: from our snacks (turon, bibingka) to desserts (leche flan, halo-halo) to even our classic dishes (tocino, adobo). But it may be hard to sate our sweet tooth considering the Philippines’ ongoing sugar shortage affecting everyone from small sari-sari stores to large soda-making conglomerates.

Looking at the data from the Sugar Regulatory Administration’s (SRA) data, as of July 31, 2022, the Philippines had domestically produced 1.8 million metric tons of sugar for the crop year 2021-2022 (Sugar Regulatory Administration, 2022). This is substantially less amount than the prior crop years which yielded an average of 2.1 million metric tons of sugar, signifying a shortage of 300,000 metric tons of sugar for this crop year. This then resulted in the price of sugar skyrocketing to about ₱100 a kilogram, about twice as expensive as last year’s costs.

This was a result of various factors, two of which were the extremely tumultuous typhoons and the increasing prices for farm inputs. Notably, Typhoon Odette and Agaton dealt about ₱12.7B (Jocson, 2022) and ₱3.3B (Sarao, 2022) respectively in damage to the agricultural sector. Similarly, fertilizer prices have been steadily rising over the past few months, from averaging ₱1,974/50kg in January to ₱2,294/50kg in April to as high as ₱2,488/50kg in July. This is paired with the rising energy costs which have been plaguing the country for the past year (Fertilizer and Pesticide Authority, 2022).

Consequently, this shortage has devastating implications for the Philippine economy throughout their macroeconomic goals, harming their progress simultaneously. Immediately, we see the closure of various soft drink bottling plants from the top 3 soda makers (Coca Cola, Pepsi, and ARC). This implies layoffs on a massive scale, putting hundreds if not thousands of Filipinos out of jobs, especially as the prices of commodities continue to soar. This has a domino effect on the rate of our economic recovery since such a loss in income will greatly affect aggregate demand, which will impact economic activity since people have lost their jobs. Not only that but the closure of these plants suggests less supply for such soft drinks in the market, increasing their price and, again, decreasing overall economic activity while raising prices.

This is especially potent considering how impactful the food and beverage industry is to the spending of the average Filipino. Since sugar is such an essential input in most food and drinks in the market, the shortage and increase in its price will be felt throughout the economy, causing food prices to rise everywhere. Because food prices will increase this will likely incentivize firms to raise their prices to keep up with inflation. To put it into perspective, the Consumer Price Index provides us with the average weights of the different commodity groups that the average Filipino spends on. For food and non-alcoholic beverages, they rank the highest consisting of 37.75% (Philippine Statistics Authority, 2022) of average expenditure thus weighing the most in the index.

Not only that, as we know from the Short-Run Phillips Curve, inflationary expectations greatly influence consumer behavior. In this scenario, with the information of a sugar shortage, people rush to buy sugar before it becomes too costly or before it runs out, thus even furthering the shortage more than before. At the end of the day, this sugar shortage affects everyone in the economy, but it will most greatly disenfranchise those whose wages remain fixed and those who have been neglected by the state in times of crisis.

But in this case, the government was not just sitting still and twiddling with their thumbs, the SRA had enacted Sugar Order No. 3 (Sugar Regulatory Administration, 2022) to import 200T metric tons of sugar last February. Though this was met with backlash considering its timing during the peak of the sugar harvest season. Consequently, SO3 had resulted in a drop in prices (and domestic revenue) to as much as 10% (Espina-Varona, 2022) which garnered backlash from various sugar groups, so much so that temporary restraining orders were filed and enacted against SO3 (Guadalquiver, 2022).

Meanwhile, Sugar Order No. 4 is currently making headlines as an uncoordinated, illegal, and imprecise means to respond to the sugar shortage. Similar to the previous sugar order, it was designed to allow for the importation of 300T metric of sugar, but the problem was that there was an issue with the lack of authority behind SO4. What had happened was former Agriculture Undersecretary Leocadio Sebastian had declared President Ferdinand Marcos Jr. as “For” the sugar order when he had not authorized it in any way. Sebastian immediately resigned from the controversy and stated that SO4 was done in good faith and response to the urgency of the sugar shortage (Fernandez, 2022).

Ultimately, amid this sugar fiasco, the government is currently working toward coordinating with major players in the sugar market and their distributors in capping the price at ₱70/kg (Monzon et al., 2022). This is paired with the fact that numerous warehouses have been found hoarding exorbitant amounts of sugar despite this shortage, leading the state to believe that this had been an artificial phenomenon brought about by greedy traders hoping to rake in profits from the new sugar prices (Parrocha, 2022).

For now, all we can do is sit with the bitter taste in our mouths knowing prices will continue to rise and that our sugary delights will be harder to come by in the near future.

Sources:

Espina-Varona, I. (2022, February 14). ‘recall Sugar Order 3’: Farmers, Labor Warn of massive losses. RAPPLER. Retrieved August 25, 2022, from https://www.rappler.com/nation/farmers-labor-warn-massive-losses-sugar-regulatory-administration-order-3/

Fernandez, B. (2022, August 23). Senators: Was sugar order no. 4 data-driven? BusinessMirror. Retrieved August 25, 2022, from https://businessmirror.com.ph/2022/08/23/senators-was-sugar-order-no-4-data-driven/

Fertilizer and Pesticide Authority. (2022). CURRENT AVERAGE RETAIL PRICES OF 6 MAJOR GRADES OF INORGANIC FERTILIZERS PER REGION. https://fpa.da.gov.ph/NW/index.php/information-resources/data/f-p-weekly-prices/year-2022

Guadalquiver, N. (2022, February 15). Regional Court issues 20-day tro vs. SRA’s Sugar Import Order. Philippine News Agency. Retrieved August 25, 2022, from https://www.pna.gov.ph/articles/1167836

Jocson, L. M. J. C. (2022, January 12). Agriculture damage due to Typhoon Odette hits p12.7b. BusinessWorld Online. Retrieved August 25, 2022, from https://www.bworldonline.com/economy/2022/01/12/423247/agriculture-damage-due-to-typhoon-odette-hits-p12-7b/

Monzon, A., Gascon, M., & Corrales, N. (2022, August 19). Ph importing sugar after all: Marcos okays 150,000 MT. INQUIRER.net. Retrieved August 25, 2022, from https://newsinfo.inquirer.net/1649416/ph-importing-sugar-after-all-marcos-okays-150000-mt

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