Cane (Saccharum officinarum) is a tall perennial grass that is widely grown in warm climates as a source of sugar. Cane grows to a height of two to five meters and has narrow, corn-like leaves and stalks that are from two to four centimeters thick. The stalks (yellow, green, purple, or striped, depending of the variety) are composed of short, jointed sections that contain the sweet, juicy pith. The plant is usually propagated by planting sections of the stalk in shallow furrows. Most sugarcane varieties mature within a period of twelve to twenty-four months.
In the Philippines, the ideal physical conditions for growing sugarcane are found in Negros Occidental, Negros Oriental, Pampanga, Batangas, Laguna, Tarlac, and Iloilo. Thus, these are the leading sugar producing provinces of the country. Early Spanish chronicles contain details of cane propagation. After the settlement of Manila by the Spaniards in 1572, sugarcanes was planted increasingly in Bulacan, Cebu, Iloilo, Laguna, and Pampanga. Negros and Pampanga have, since then, dominated the country's sugar industry.
The primitive system f extracting juice from cane consisted of exerting pressure on a hand or foot-lever against a fixed wooden surface. This technique was later improved by crushing cane between two upright wooden rollers using human power. With the arrival of Chinese immigrants in the Philippines during the early decades of the Spanish Occupation, stone cylinders replaced the wooden rollers, and carabaos were used to operate these crude extractors. Muscovado, or unrefined sugar, and molasses because important commercial trade items, but sugarcane juice was also fermented into wine, as in the famous basi of northern Luzon provinces. Steam power, from imported machinery and equipment, later replaced human and animal power in the milling processes . Centrifugal mills were eventually installed.
Shortly after Manila was opened to foreign commerce, the first shipment of sugar to the United States was made in 1796. By the turn of the nineteenth century, the landowner and trader classes began diversifying sugar production. When the galleon trade ended in 1815, those who were formerly engaged in it began investing in large sugarcane plantations in the provinces. Negros became the country’s principal main sugar producer, and the Ilongo planters, the wealthiest among the regional elite.
Sugar production increased steadily from then on, interrupted only by the Philippine Revolution that did considerable damage to the industry. By the first decade of the twentieth century and the start of American colonial rule, however, the sugar industry had recovered and, in fact, had started modernizing.
Foreign and domestic investors started constructing modern centrifugal sugar mills in response to a guaranteed U.S market fro the Philippine sugar after successful lobbying. First, the U.S. Congress passed the Payne-Aldrich Act, guarantying a quota of 300,000 tons of duty-free sugar to the Philippines, and shortly after, free trade was established between the U.S. and the colony. The latter development assured the producers unlimited access to the large U.S. sugar market. To assist in financing the increased requirements of the sugar industry, the colonial government organized the Philippine National Bank in 1916.
When the Philippines was granted commonwealth status in 1934, sugar exports became subject to limited quota instead of unlimited free market trade. The quota was later extended under the Laurel-Langley Agreement to last beyond the date of Philippine independence in 1946, and to expire in 1974. The agreement provided for a progressive reduction in the Philippine duty-free quota, and a gradual shift of sugar exports to the competitive world market. World events in the 1960s, however, shook the sugar market.
The United States severed relations with Cuba, and to abort a sugar shortage, granted the Philippines an increase in the sugar quota despite the provisions of the Laurel-Langley Agreement. The Philippines, in response to an expanded market, launched a crash program to meet the demand. Cultivation was extended to marginal forest lands, and even lands planted to rice were converted to sugarcane. After 1974, however, the Laurel-Langley Agreement expired, and the U.S. abandoned its sugar quota system. After sixty years of enjoying the protected American market, the Philippines entered into the highly competitive world market.
Up to 1974, however, despite the considerable expansion of both hectares and milling capacity, the Philippines was generally incapable of meeting its expanded quota due to production inefficiencies. Trade policies implemented during the martial law years were, from the start, fraught with controversy.
When world sugar prices peaked in 1974, shortages were felt in the domestic sector. Because domestic sugar was sold at a low price due to price control, amounts intended for local consumption were diverted to the world market. This led to a decision of the Marcos government to take over sugar trading under the Philippine Exchange Company. Sugar trading for domestic and export markets had always been a private sector concern prior to 1974.
When the prices in the world market proved to be volatile, a new sugar body with the authority to decide on policy matters affecting the sugar industry – including the power to determine the trading agency for both the export and domestic markets – was organized. Thus, the Philippine Sugar Commission was created in 1978. The PHILSUCOM, in its turn, decided to set up the National Sugar Trading Corporation, or NASUTRA. This was a subsidiary trading company to handle domestic and international sugar trading.
The NASUTRA purchased the output of all sugar producers after harvest; and all buyers or sugar had to deal with this body. This policy was justified according to the single trading agency or a public monopoly concept. The concept, which was applied to more than just the sugar industry, proved to be highly offensive and contributed to the undoing of the Marcos presidency.
