Sugar consumption, prices up amid challenges
VAIL, Colo. — U.S. sugar consumption is up along with prices as weather, supply chain problems and speculators disrupt the industry, officials and regulators said here last week at the International Sweetener Symposium sponsored by the American Sugar Alliance, an organization of cane and beet growers.
After years of concern in the industry, American consumers during the COVID-19 pandemic increased their sugar consumption, Jeffrey Dobrydney, senior vice president and head of futures and options at JSG Commodities in Norwalk, Conn., told the sugar growers.
“Folks are moving away from strictly organic diets and are eating like they were in the ’80s and ’90s,” Dobrydney said. “All the global turmoil in the world has led to more consumption.”
In the United States, he added, consumers are making many trips to Costco warehouse stores and eating more desserts.
Dobrydney made the comments as the July 27 edition of the Sosland Sweetener Report, which was distributed at the symposium, said, “The sweetener market — both sugar and corn sweeteners — remains in disarray.”
“For sugar price offers and some sales ranged from 55 cents to as much as $1 a pound Midwest, the latter for any type of sugar (bulk, bags, liquid). Some bulk beet sugar was said to have traded at 70 cents a pound and above Midwest from distributors and resellers. At the same time, sales of refined cane sugar from about 55 cents to 65 cents a pound also were reported in the region.”
The Sosland report said, “High spot sugar prices were accompanied by ongoing logistical issues at all levels — trucks, trains and containers, and by labor shortages at many ingredient processing and food manufacturing plants. And there is growing concern about sugar supplies and prices in 2023.”
But in addition to higher demand and supply chain problems, Dobrydney said that speculators who have no interest in sugar other than making money are playing a role in higher prices.
“Large money has flowed into commodities and sugar” in the world dominated by the coronavirus pandemic and Russia’s invasion of Ukraine, he said. Speculators first expected the prices of contracts to rise but now think they will fall, he said. Along with that, sugar prices have retreated somewhat, he said.
Barb Fecso, the chief of the Commodity Analysis Branch at the Agriculture Department’s Farm Production and Conservation Business Center, whose job is to manage the congressionally mandated sugar program so that there is an adequate combination of domestic and imported sugar at reasonable prices, said that the sugar market is not acting in an ”orderly” fashion.
Sugar crops are not being sold in advance as they normally would, Fecso said, because there are underlying weather and supply chain problems. The stress began two years ago, she said, with a weather-related reduction in the beet crop. “The recent stress is beet motivated and it is weather-related,” she said.
But cane refiners also say they don’t want to turn more raw sugar into refined if they don’t have rail cars to ship and there is a shortage of rail cars, Fecso said. It’s dangerous to open a sealed rail car and take out some sugar because it could lead to contamination, she added.
Fecso said that if she were a sweetener user she would book her sugar supply for the whole year. If the users “don’t do that and they have to go on the spot market I don’t feel all that sorry for them. If supplies dry up I have more sympathy.”
Fecso noted that she had taken actions to add 2 million tons of imported sugar to the market. One trade group that is not a member of the Sweetener Users Association wrote her that she had failed miserably. “I take offense to that,” Fecso said. “I don’t think we should be criticized for not taking action.”
Randy Green, a principal at Watson Green LLC and a consultant to the Sweetener Users Association, said that many of the problems users have experienced with sugar are not specific to sugar, particularly the shortage of rail cars and the difficulty in hiring truck drivers. But users sometimes have been forced to acquire sugar in bags rather than in bulk.
When he asked Sweetener Users members to comment on their experience, some said they had better experiences with sugar than with other ingredients, he noted.
But Green said the shortage of sugar has led users to ask whether the system of “just in time” delivery under which the users do not store sugar is really “not in time.”
And some users are questioning whether the stocks-to-use ratio that USDA tries to maintain at 13.5% to 15.5% is “distorted by various factors and is no longer useful.”
Users have been buying more imported sugar at high-tier tariffs, Green said, and there is a risk of becoming permanently reliant on high tier imports.
The panel did not discuss whether the current U.S. sugar program is an adequate safety net for producers.
But on March 1, Rob Johansson, the American Sugar Alliance director of economics and policy, testified both the House Agriculture Committee that the current loan rates for cane sugar and refined beet sugar have not kept up with inflation or the cost of production. Johansson said ASA would support an examination of how the farm safety net could be updated for all Title 1 commodities in the next farm bill.
When asked at the end of the session why they find sugar fascinating, Dobrydney said sugar is more interesting that most commodities because there are two crops that produce the same thing and there is such a strong interaction with government policy.
Fecso said that while managing the sugar program she had developed “such a vast network of contacts” who tell her the most fascinating stories.
She noted that when musicians dream they see musical notes.
When she dreams, Fecso said, “I see the markets.”
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