From the mid-nineteenth century to the mid-1970s, sugar was the most important agricultural export of the Philippines, not only because of the foreign exchange earned, but also because sugar was the basis for the accumulation of wealth of a significant segment of the Filipino elite. The principal sugarcane-growing region is the Western Visayas, particularly the island of Negros. In 1980 the region accounted for half the area planted in cane and two-thirds of the production of sugar. Unlike the cultivation of rice, corn, and coconuts, sugarcane is typically grown on large farms or haciendas. In the mid-1980s, more than 60 percent of total production and about 80 percent of Negros's output came from farms twenty-five hectares or larger. Countrywide, tenancy arrangements existed for approximately half the sugarcane farms; however, they were generally the smaller ones, averaging 2.5 hectares in size and accounting for only slightly more than 20 percent of land planted in the crop. Elsewhere, laborers were employed, generally at very low wages. A survey undertaken in 1990 by the governor of Negros Occidental found that only one-third of the island's sugar planters were paying the then-mandated minimum wage of P72.50 per day. The contrast between the sumptuous lifestyles of Negros hacenderos and the poverty of their workers, particularly migrant laborers known as sacadas, epitomized the vast social and economic gulf separating the elite in the Philippines from the great mass of the population.
In the 1950s and 1960s, sugar accounted for more than 20 percent of Philippine exports. Its share declined somewhat in the 1970s and plummeted in the first half of the 1980s to around 7 percent. The sugar industry was in a crisis. Part of the problem was a depressed market for sugar. A dramatic increase in the world price of sugar had occurred in 1974, peaking at US$0.67 per pound in December of that year. The following two years, however, saw prices fall to less than US$0.10 a pound and remain there for a few years before moving upward again toward the end of the decade. Sugar prices fell again in the early 1980s, bottoming in May 1985 at less than US$0.03 per pound and averaging US$0.04 per pound for the year as a whole. In early 1990, prices had recovered to US$0.14 cents per pound then declined to approximately US$0.08 to US$0.09 per pound.
Historically, the Philippines was protected to a certain degree from vicissitudes of the world price of sugar by the country's access to a protected and subsidized United States market. In 1913 the United States Congress established free trade with its Philippine colony, providing Filipino sugar producers unlimited access to the American market. Later, in 1934, a quota system on sugar was enacted and remained in force until 1974. Although Philippine sugar exports to the United States were restricted during this period, the country continued to enjoy a relatively privileged position. Philippine quotas for the United States market in the early 1970s accounted for between 25 and 30 percent of the total, double that of other significant suppliers such as the Dominican Republic, Mexico, and Brazil. After the quota law expired in 1974, Philippine sugar was sold on the open market, generally to unrestricted destinations. As a consequence, shipments to the United States declined.
On May 5, 1982, the United States reestablished a quota system for the importation of sugar. Allocations were based on a country's share in sugar trade with the United States during the 1975-81 period, the period during which Philippine sugar exports to the United States had dwindled. The Philippine allotment was 13.5 percent. Efforts by the Philippine government to have it raised to 25 percent, the country's approximate share during the previous quota period, were unsuccessful. The loss of sales imposed by the reduced quota share was compounded by a dramatic 40 percent drop in total United States imports of sugar in the mid-1980s as compared with the early 1970s. Philippine sugar exports to the United States that had averaged just under 1.3 million tons per year in the 1968-71 period averaged only 284,000 tons from 1983 to 1988, falling to approximately 161,000 tons in 1988. In 1988 only 273 thousand hectares were planted in sugar, about half that of the early 1970s.
During the earlier quota period, Philippine producers enjoyed high profits, but operations were inefficient and lacking in mechanization. Sugar yields in the Philippines were among the lowest in the world. Increases in production occurred through expansion of land area devoted to sugarcane. With falling prices and the end of the United States quota, attempts to improve productivity through mechanization increased yields, but caused a dramatic fall in labor requirements, initially by 50 percent and, over a longer period, by an estimated 90 percent. In an island economy such as that of Negros, where sugar has accounted directly for 25 percent of employment, the consequent actual and potential lost livelihood was disastrous.
The decline of the sugar industry was complicated by the monopolization that took place during the martial law period, a process not dissimilar to what occurred in the coconut industry. In 1976, as a reaction to the precipitous decline in sugar prices, Marcos established the Philippine Sugar Commission (Philsucom), placing at the head his close associate Roberto Benedicto. Philsucom was given sole authority to buy and sell sugar, to set prices paid to planters and millers, and to purchase companies connected to the sugar industry. A bank was set up in 1978, and the construction of seven new sugar mills was authorized at a cost of US$40 million per mill.
By the 1980s, considerable resistance to Philsucom and its trading subsidiary, the National Sugar Trading Corporation (Nasutra) had been generated. As with the monopoly in the coconut industry, the government acquiesced in its 1985 agreement with the IMF to dismantle Nasutra. But the damage had been done. In a study undertaken by a group of University of the Philippines economists, losses to sugar producers between 1974 and 1983 were estimated to be between P11 billion and P14 billion. Aquino established the Sugar Regulatory Authority in 1986 to take over the institutions set up by Benedicto.