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SWEETENER USERS WARN LOW U.S. SUGAR SUPPLIES, TROPICAL WEATHER ARE RECIPE FOR HIGHER RETAIL PRICES and MARKET DISRUPTION
Published: 21/07/2009 Author: Sweetener Users Association Abstract: Washington, D.C. – July 21, 2009 – Faced with a combination of near-record refined U.S. sugar prices, domestic production shortages and refining capacity issues, food and beverage manufacturers that rely on an assured supply of sugar are concerned about the potential market disruption for the remainder of the year, particularly with hurricane season looming. Pointing to repeated claims by the American Sugar Alliance that sugar prices are low and last week’s assertion that the market is “sufficiently supplied,” the Sweetener Users Association (SUA) says that such claims are misleading and dangerous.
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SWEETENER USERS WARN LOW U.S. SUGAR SUPPLIES, TROPICAL WEATHER ARE RECIPE FOR HIGHER RETAIL PRICES and MARKET DISRUPTION Despite Sugar Industry Claims, Domestic Sugar Supplies Far From Adequate
Washington, D.C. – July 21, 2009 – Faced with a combination of near-record refined U.S. sugar prices, domestic production shortages and refining capacity issues, food and beverage manufacturers that rely on an assured supply of sugar are concerned about the potential market disruption for the remainder of the year, particularly with hurricane season looming. Pointing to repeated claims by the American Sugar Alliance that sugar prices are low and last week’s assertion that the market is “sufficiently supplied,” the Sweetener Users Association (SUA) says that such claims are misleading and dangerous.
The current wholesale price of U.S. refined sugar is 35 cents per pound – far above historic norms. Only one of the past 18 years has seen higher refined sugar prices and that was in the aftermath of Hurricane Katrina, which closed cane sugar refineries for months as recently as 2005.
The U.S. Department of Agriculture’s weekly Crop Progress reports noted that sugar beet plantings were well behind normal and will result in a late start to harvesting. Meanwhile, sugarcane area for harvest is down two percent from a year ago and the lowest since 1990.
Recent Mexican imports have been helpful but are now winding down with the end of the Mexican sugarcane harvest. Mexican sugar companies are now saying they too need looser import restrictions to prevent shortages in coming months.
Additional evidence of the tightened sugar market is that U.S. refineries will have to operate at near-record rates to supply adequate sugar to the market for the remainder of the season. The risk of disruption from adverse weather is particularly worrisome to food and beverage manufacturers. USDA projections for next season show even lower supplies.
According to current policy as mandated in the 2008 farm bill, the USDA is to provide an adequate supply of sugar at reasonable prices. But even USDA’s own numbers show that more supplies are needed and prices are high.
“With its rosy scenario, the American Sugar Alliance is setting up the U.S. Department of Agriculture to take the blame if anything goes wrong in the markets this summer and fall,” said Fred Hensler, chairman of SUA.
SUA members say that increasing the supply has the potential to benefit consumers, preserve and add jobs by guaranteeing adequate supplies to keep production lines running, and potentially reduce taxpayer costs as food prices affect inflation-indexed programs.
The Sweetener Users Association (SUA) represents confectioners, bakers, cereal manufacturers, beverage makers and dairy food companies that use sugar, as well as trade associations for these industries. SUA members support a healthy domestic sugar-producing and sugar-processing industry that can deliver an ample supply to refiners, industrial users, and consumers, but SUA believes sugar policy should support producer incomes without distorting the market.
