Product reformulation bigger challenge to sugar than Mexico problems
March 9, 2017
DANA POINT, Calif. — Food companies' product reformulations to fit within the recommendations of the Dietary Guidelines for Americans and to reduce the amount of sugar shown on the new "added sugar" section of the rewritten Nutrition Facts Label are the biggest challenge to the sweetener industry – bigger than those surrounding the sugar dispute with Mexico, a key industry analyst said in Dana Point last week.
"Everyone knows marketing is pounding on you to reduce sugar, to get it off the label. The entire sugar industry is in a very tenuous time," Craig Ruffolo, vice president of McKeany-Flavell Co., a California ingredients advisory firm, told an audience of sugar buyers at the International Sweetener Colloquium.
Speaking on one of two panels on the U.S. sugar market, Ruffolo also said that his definition of the sweeteners facing challenges include high-fructose corn syrup, which many food manufacturers use instead of sugar.
Much of the panel discussion focused on the continuing conflict between the U.S. and Mexico over Mexico's sugar exports to the U.S. Mexico's exports are now occurring under agreements that suspended cases U.S. sugar producers brought against Mexico for subsidizing and dumping sugar in the U.S. There is a lot of dissatisfaction with the suspension agreements because cane refiners have said they are not getting enough raw sugar to refine. U.S. and Mexican officials have attempted to renegotiate the suspension agreements, but so far have not been able to come to agreement.
BEET VS. CANE
Meanwhile, some food companies have switched from beet sugar to cane sugar to avoid any connection to genetic modification, even though beet growers have argued there are no signs of genetic modification in the beet sugar. The switch has led to higher prices for cane sugar than beet sugar.
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Frank Jenkins, a Connecticut-based sugar broker and consultant, said that, if nothing changes in the suspension agreements, the losers will be those companies that continue to buy refined cane sugar at a massive premium rather than cheaper beet sugar.
Even if agreement is reached soon, the markets might not be affected in the near future because most of the industrial sugar has already been contracted for this year, Jenkins said.
If the suspension agreements "collapsed," Jenkins added, Mexico would be likely to bring an anti-dumping case against U.S. corn refiners who export to Mexico "as a stalling tactic."
Barb Fecso, director of the dairy and sweetener analysis group at the Agriculture Department's Farm Service Agency, said she spent most of last year trying to renegotiate the suspension agreements and that she is awaiting appointment of Trump administration officials to give her instructions on how to run the sugar program on the no-cost basis that Congress required in the farm bill.
On another panel, Mike Gorrell, president and CEO of the Imperial Sugar Co., a cane refiner, said that the reason the conflict with Mexico has become so intense is that there is $8.2 billion in value at stake, depending on how these issues are resolved.
"The U.S. sugar market will remain the most volatile, most dysfunctional, most political sugar market in the world until Mexico's access is restructured permanently," Gorrell said.
Jack Roney, director of economics and policy analysis for the American Sugar Alliance, said that growers feel it is "vexing" that sweetener users go to Congress and say that consumers would benefit from increased imports or changing the program when prices of sugar-containing products do not go down in periods of low sugar prices.
"Only food manufacturers would benefit," Roney said.
Bill O'Conner, an agricultural policy adviser with McLeod, Watkinson & Miller who is an adviser to the Sweetener Users Association, said, "USDA does not have the ability to address the tensions in what is now a two-priced market" for beet and cane sugar.
O'Conner also said he does not believe "the public" will stand for beet sugar not being labeled as a genetically modified ingredient in food, even though beet growers point out that there are no remnants of the genetically modified beet sugar seed in the sugar.
"The farm bill will be the first opportunity to change the law we are operating under," O'Conner said.
After the session, panel moderator Rick Pasco, president of the Sweetener Users Association, said the SUA does not have a position on whether beet sugar should be labeled as genetically modified or not.