NEW YORK CITY -- As sugar prices rise to levels not seen in two decades, some in the baked goods and confectionery markets are growing increasingly worried. According to one prediction by U.S. government analysts, the stocks-to-use ratio for sugar in September 2010 will be the lowest since 1959. So great is the concern that many in industries dependent on the commodity are urging significant increases in imported sugar quotas to avoid shortages.
“Right now you see raw sugar in the area of 28¢ to 29¢ a pound; that’s the U.S. price now,” said Steve Hailey, an economist with the U.S. Department of Agriculture. “I’d say that 20¢ to 22¢ is the norm. Anything above 23¢ is quite remarkable.”
While sugar prices are not yet at record highs, they have shown a considerable increase over the past year.
Hailey said there is no shortage of reasons for the increase in sugar prices. For instance, on Feb. 7, 2008, an explosion at a sugar refinery in Port Wentworth, GA, owned by Imperial Sugar that killed 13 people and injured more than 40 put a definite crimp in processing capacity. Additionally, alternative crop prices have shot up, prompting farmers to plant soybeans, wheat and corn. As a result, the beet sugar crop has dropped significantly, exerting upward price pressure on refined sugar. “What we’re looking at now is an extremely short situation,” the USDA economist said.
In its Aug. 11 issue, Milling & Baking News, reported that Midwest beet sugar was 35¢ to 35.5¢ a pound, higher than the fiscal or calendar-year average reported by USDA in any year over the past two decades except for 2006 and '07, when prices skyrocketed because of hurricanes. The publication noted that its figures depict an increase of more than 25% above average price levels for the past five years.
On Aug. 7, the Sugar Policy Alliance sent a letter to Agriculture Secretary Tom Vilsack urging him to increase sugar import quotas immediately to avoid shortages. Among the companies signing the letter were the American Bakers Association, American Beverage Association, Competitive Enterprise Institute, ConAgra Foods, Consumer Federation of America, Council for Citizens Against Government Waste, Emergency Committee for American Trade, and General Mills, along with the Hershey Co., Independent Bakers Association, International Dairy Foods Association, Kraft Foods, Mars, National Confectioners Association, Nestlé USA, Sweetener Users Association, Unilever and U.S. Chamber of Commerce.
A statement from the Sweetener Users Association said: “Despite the U.S. Department of Agriculture’s crop report figures indicating roughly 700,000 short tons of raw sugar available at the end of the 2009/2010 marketing year, the U.S. sugar market is still tight and will need additional imported sugar to meet projected demand.” The association, which groups American confectionery companies and bakeries among others, noted that industrial users use refined and not raw sugar.
The unprecedented high prices of raw sugar, noted by the SUA, combined with the inability to forecast weather conditions and ongoing sugar refining capacity issues warrant immediate action in increasing the Tariff Rate Quota that would allow additional imports of sugar to enter the market. Such increased imports would, according to the SUA, 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.