Sugar wars


 When the Central Azucarera de San Antonio (CASA) became operational in Passi City several years ago, there was a lot of expectation that it will bring back the moribund sugar industry in the Province of Iloilo and the adjoining towns of Capiz to its feet. The CASA sugar central, with a milling capacity of 8,000 tons of cane sugar every day, is considered the most modern in the country. Modernity is often equated with efficiency, and efficiency translates to better yields, and better yields mean bigger returns for sugarcane planters.

But local sugarcane planters are restive over the business practices of CASA, and an atmosphere of suspicion and distrust seems to be hanging in the air. That’s because Steven Chan, its chief executive officer, has reportedly tried to pull a few tricks on them. Sugarcane planters who had spoken to me describe a relationship where CASA wants to dictate the terms, and the terms are usually stacked in its favor. As a result, many of them prefer to do business with the other sugar central in San Enrique, URC (Universal Robina Corp.).

The sugar industry in Iloilo has declined over the last three decades as world prices of the commodity collapsed in the early 80s. The economy of Iloilo somehow survived that collapse because it didn’t depend solely on the sweetness of sugar, unlike Negros Occidental where a price dip for sugar can have devastating results. However, wide tracts of land that used to be teeming with sugarcane became idle. With its diversified economy, local planters turned to other endeavors.

It didn’t help that the existing sugarcane mills in Iloilo province in the pre-CASA era were quite old. One sugarcane milling central in Barotac Nuevo had long ceased operations. The once proud Calinog sugar refinery had also been shut down, its machinery and equipment torn down and sold for scrap. The market for refined sugar also remained volatile; the ups and downs of its price provided no incentive for planters to resume their production.

Three factors resuscitated the local sugar industry’s drive to produce more. The first is the establishment of the CASA sugar central in Passi City a few years ago. This was followed by the take-over of the old Passi Sugar Central by the Gokongwei-group. The third was typhoon Ondoy in the national capital region three years ago. 

Indeed, the wide swath of destruction left behind by Ondoy perked up the sugar industry. How? Almost all the stocks of refined sugar hoarded by big traders in Metro Manila were damaged by the floods. All of a sudden, the local supply of the commodity dropped precipitously. The traders couldn’t turn to the world market, because prices, too, have gone up. This proved to be a source of bonanza for the local sugarcane industry.

It was the basic law of supply and demand at work. As traders struggled to rebuild their stocks, the market price of sugar went up. Naturally, the sugarcane production for 2009 and 2010 fetched better prices. From a tame P1,000 per bag, it went up to P2,400 per bag. For local planters, the situation couldn’t have been better. With a new sugar central in operation, they were assured of dependable and efficient milling services. The sugar planters fell in love with CASA.

The love affair, however, proved short-lived. Local planters, through their associations, started noticing the not-so-pleasant tricks being played on them by CASA. One recent incident has caused widespread discontent among these sugar planters. After an audit was conducted on the two sugar centrals, it was discovered that there was excess sugar stocks, or “overage” in industry lingo, in the warehouse of CASA. According to a source, CASA’s excess sugar was 19,000 bags.

The arrangement between the sugar centrals and the planters is that this excess sugar will be distributed to the planters in proportion to their production. There is no quarrel about that. Chan reportedly asked the planters associations that only 15,000 bags will be distributed, which was quickly approved. However, the quedans (the legal instrument for the trading of sugar) had taken long to be issued by the Sugar Regulatory Administration (SRA), and the sugar stocks could not be sold just yet.

As the waiting went on, the market price of sugar started to go up. Seeing this, Chan started to offer to certain groups to buy their share at the prevailing price. Apparently, he didn’t want to wait until the quedans were issued, and the price had already gone higher. This caused a level of discomfiture among the planters associations. Chan was undermining them, they felt. The planters were willing to sell now even without the quedans.

It’s a classic “divide and rule” tactic. It raised havoc among the ranks of the planters. Why not buy from them as a whole, and not on a selective basis?

With distrust having contaminated the business relationship, the planters associations now make it a point to deploy checkers to watch the movements in the sugar centrals on a 24/7 basis. It’s as if they can’t depend on the sugar centrals to observe simple honesty in their transactions. Instead of working in harmony to rebuild the sugar industry, they now regard each other with muted hostility.

CASA was heralded as the best thing to come for the sugar industry. Unfortunately, that’s not how a number of sugar planters now look at it. According to a planter, CASA has turned to offering a 67-33 sharing with the planters, which is better than the 65-35 (65 to the producers and 35 to the central) ratio of URC. But many are not biting. As a result, CASA is unable to fully make use of its maximum milling capacity. About half of the production goes to the smaller capacity URC sugar central.

We’d certainly like to see Chan come to terms with the sugar planters. In the long run, everybody will win. With higher production, more hectarage of idle lands will be back in productive use. That will bring more jobs for people in the rural areas. Hopefully, Iloilo can regain its status as one of the top producers of sugarcane in the country, a distinction that led to its reputation as the land of the rich many years ago.

 

About Manuel "Boy" Mejorada
Manuel "Boy" Mejorada is a journalist and social media activist. A former Iloilo provincial administrator, he is now waging a crusade against corruption and narco-politics.

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