The Sugar Industry In The Philippines Economics Essay

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The Sugar Regulatory Administration ( SRA ) said in a statement yesterday that sugar production for harvest twelvemonth 2009-2010 will make merely 1.97 million MT, against an initial estimation of 2.18 million MT, due to the drier-than-usual conditions caused by the El Nino conditions form in the Pacific.

The authorities said last January it would seek 150,000 MT of sugar, its first return to the planetary market since 2006, as it sought plenty stocks to run into local demand and go on discriminatory exports of the sweetening to the United States.

“ The initial volume of 150,000 MT imported may non be sufficient to surge the state over during the off-milling months, because El Nino canes [ sic ] are weak and low in saccharose, which discourages early milling, ” SRA said.

“ Intensifying the state of affairs is the addition in ingestion by around 23 % than the old harvest twelvemonth which adds force per unit area to saccharify stocks, ” it added.

“ There is, hence, a demand to augment the buffer supply during this thin, off-milling months. ”

The majority of the excess sugar to be imported, which can be either raw or Whites, is likely to be sourced from neighbouring Thailand, the universe ‘s 2nd biggest exporter behind Brazil, so it can get before Aug. 30, the terminal of the current harvest twelvemonth, Aida F. Ignacio, SRA deputy decision maker, said yesterday. “ We can run into the Aug. 30 deadline if the sugar comes from Thailand, ” Ms. Ignacio told Reuters.

The Philippines normally builds a buffer stock of at least 300,000 dozenss of the sweetening by the terminal of each harvest twelvemonth.

Traders said on Wednesday that the Philippines was purchasing Thai white sugar at record premiums of $ 120/MT over the London market for nearby cargo, demoing domestic stocks may non be plenty to run into demand.

But Ms. Ignacio said the state ‘s stocks of both refined and natural sugar presently stand at 600,000 MT, tantamount to about four months of ingestion. “ Harmonizing to our statistics, there is a comfy supply of sugar at present. The extra importing is to guarantee that local supply will last at the terminal of the twelvemonth, ” she said.

The authorities would likely apportion the extra volume to commissioned companies, with each importer limited to import up to 10,000 MT, alternatively of auctioning off the import rights, Ms. Ignacio said.

The Philippines consumes around 2 million dozenss of sugar yearly. It expects to acquire the 150,000 dozenss sugar it purchased earlier this twelvemonth by end-July, Ms. Ignacio said. The state besides exports 136,000-137,000 MT of sugar to the United States under an one-year quota, which was increased this twelvemonth after other states failed to make full their quota volume.

“ We ‘ll hold an estimated buffer stock of 300,000-330,000 MT if the extra imports come in, ” said Ms. Ignacio, adding there may be no demand for farther imports with supply expected to better when milling starts in October-November

For about twenty to thirty old ages, buffer stock strategy have been used by national authoritiess or collectives of manufacturers. The monetary value of agricultural merchandises like sugar tends to lift and fall more than the monetary values of manufactured merchandises and services. The changeless alteration in the monetary values is due to the volatility in the market supply of agricultural merchandises along with the inelastic monetary value of demand and provide this means that the market has an inability to rapidly set supply or demand despite alterations in market conditions. One manner that the authorities attempts and helps the unstable supply is to implement buffer stock strategies. Buffer stock strategies are used to supply stable monetary values in an full economic system or an single market by utilizing trade good storage. What this means is that authoritiess will seek to purchase up agricultural merchandises when there is a good crop and a excess in supply and in return sell stocks when the supply of the merchandise is low during a bad crop. Since the Philippines consumes around a hundred and sixty seven thousand metric tons with a 20 three per centum addition in ingestion, it is critical that the authorities should sell their buffer stocks or seek and import more from other states like Thailand.

In paragraph 7 “ The Philippines normally builds a buffer stock of at least 300,000 dozenss of the sweetening by the terminal of each harvest twelvemonth. ” If the manufacturers ca n’t reap adequate harvests for the authorities to purchase and shop, in the event that there is a bad crop, and there will be a excess in demand, the authorities will necessitate to let go of the nonexistent buffer stock. Therefore, by importing stock from Thailand, the Philippines would be able to run into the demands of its citizens. If the authorities establishes the optimum monetary value, the intercession monetary value at P2, which is the guaranteed minimal monetary value, set by a authorities, for agricultural green goods. If the monetary value of the green goods falls below the intercession monetary value, the authorities or buffer stock bureau buys the trade good at that monetary value. This means that the authorities will hold a shop of sugar ; so that when the monetary value is excessively high, the authorities will let go of their shop of sugar and drive the monetary value down to the intercession monetary value. Because the Philippines is enduring from a deficit of sugar, as mentioned before, the authorities will hold to buy buffer stock from another state. This allows the Philippines to stabilise monetary values for when the supply of the sugar gets excessively low. If the production of sugar is merely at 1.97 million MT of sugar, the monetary value of sugar will be at P1 which is above the intercession monetary value, the authorities would desire to convey the monetary value back down to intervention monetary value, therefore they must purchase the stock from another state in order to acquire supply at S2 and hence the monetary value back down to the optimum degree.

Theoretically, buffer stock strategies should be net income doing due to the purchasing of the stocks of merchandise when monetary value is low and merchandising when the monetary value is high. Conversely, buffer stock strategies tend to non work good when put into drama. Some of the autumn downs include the fact that these agricultural merchandises can non be stored for a long clip because they are perishable goods. Another job is that making a buffer stock strategy needs a considerable sum of start up capital, due to the fact that money is needed to but up the merchandise when monetary values are low. Other factors that impact the buffer stock strategies is that administrative and storage costs will be high. One more thing to see when speaking about buffer stock strategies is that in order for a buffer stock to win, the authorities needs to correctly gauge the mean monetary value of the merchandise over a period of clip. The appraisal of the strategy ‘s mark monetary value will find the upper limit and minimal monetary value boundaries. Besides, if the mark monetary value is excessively low, than the authorities will stop up selling more than how much they have and they will run out of stock. However, the advantages that come from buffer stock strategies is that they allow sudden alterations in demand for a merchandise, there is less opportunity of loss of production due to stock outs and that there could be an advantage of bulk purchasing from the economic systems of graduated table.