Wow. Partly Through the Crowding Out, 9 Of 12 Sugar Refineries Stop Operations

Last March, I explained the effects of the movements of laborers from the sugar industry to “build, build, and build” [see emailBullseye! Crowding Out Effect in Motion: Sugar Farmers Move to the Construction Industry! Excise Taxes: Will Sardine Manufacturing Be the Next Coca-Cola? March 5, 2018]

Aside from the crowding out, this anecdote provides two other incisive perspectives. The first is the conflict of economic policies. The SRA is tacitly competing with the public agencies engaged in Build, Build and Build. Or, the crowding out syndrome applies even to government agencies.

The most important is that the National Government (NG) now determines the direction of the economy!

Yet, such crowding out dynamic will have very nasty effects.

Unless landowners mechanize sugar farming to replace the loss of farm labor, the industry’s output will diminish. HIGHER prices of sugar or on agricultural products affected by the worker migration will ensue.

From the Inquirer: 9 of 12 sugar refineries stop operations, says SRA (June 27, 2018) [bold added]

Nine of the country’s 12 sugar refineries have stopped operations earlier than usual this crop year due to the 15 percent drop in cane production.

Sugar Regulatory Administration (SRA) chief Hermenegildo Serafica said that as of this week, only three refineries have remained operational – Central Azucarera Don Pedro, Inc. in Luzon, Busco Sugar Milling Company Inc. in the Visayas and Lopez Sugar Corp. in Mindanao.

Usually, sugar refineries suspend operations by July or August when the crop season ends. But with the decline in cane output to 2.064 million metric tons (MT) from 2.437 million MT last year, companies had been forced to close earlier.

Firms that stopped operations are URC-Carsumco, Luisita Sugar Refinery, Biscom Inc., First Farmers Holding Corp., URC-Ursumco, URC-Sonedco, Victorias Milling Co., Hideco Sugar Milling Co., Davao Sugar Central Co Inc.

Due to lower output, sugar prices have risen.

The wholesale price of raw sugar surged by 42 percent to P2,148 per 50-kilogram bag (LKg) last week from P1,507.71 per LKg at the start of the year, while retail prices have risen by 10.48 percent to P52.72 a kilo from P47.56 a kilo.

The sugar industry’s dilemma has been caused by many factors. And a significant ingredient has been the crowding-out syndrome.

Needless to say, transfers, as a result of public policies, don’t result in value-added or productive growth.