U.S. faces sugar shortage, higher prices | TheFencePost.com

U.S. faces sugar shortage, higher prices

Discussing the international sugar market outlook today, from left, Ronald Lord of the USDA’s Foreign Agricultural Service (moderator), James Liddiard of Agrilon Commodity Advisers, Vincent O'Rourke of C.Czamikow Sugar Inc., and Tom McNeill of Green Pool Commodity Services.
Photo by Jerry Hagstrom/The Hagstrom Report

PALM SPRINGS, Calif. — After last year’s bad weather in the Midwest, a freeze in Louisiana and a drought in Mexico, the United States faces a shortage of sugar this year, with prices for industrial sweetener users to be several cents above average, sugar analysts said at the the International Sweetener Colloquium, a gathering of sweetener users at the La Quinta resort near here.

A national refiner of raw sugar is offering refined cane sugar at 44 cents per pound now and 41 cents for calendar year 2021, compared with a usual price of 37 to 38 cents, Ron Sterk, the senior editor for markets for Kansas City-based Sosland Publishing, said in a presentation.

And a Midwest beet producer is offering beet sugar at 36.5 cents for the year beginning in September, Sterk said, compared to the 33 cents to 35 cents per pound in recent years.

And there is uncertainty about the quality of those supplies, added Frank Jenkins, president of JSG Commodities. Companies that have been dependent on some of the most reliable Midwestern suppliers will now have to deal with “a hodge podge” of raw sugar coming into New Jersey, Georgia, the Gulf of Mexico and California to be refined before it reaches the end users, Jenkins added.

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“It’s a horrible match,” Jenkins said.

The bad weather hit particularly hard in the Red River Valley of North Dakota and Minnesota, which have some of the most sophisticated just-in-time delivery systems for candy makers and other food companies in Chicago and other midwestern cities.

Jenkins noted that the Agriculture Department can make changes to its sugar management system to make it easier and cheaper to bring raw cane sugar from other countries into the United States, but has no control over the refining process once sugar enters the country.

Jenkins said U.S. cane refining capacity is “finite” at 550,000 to 565,000 tons per month “and will be tested” this year.

Jack Roney, the chief economist for the American Sugar Alliance, which represents the cane and beet growers, told The Hagstrom Report in an interview that he believes the situation will be “sorted out” as USDA allows more imports.

Roney said he considers Jenkins’ analysis of refining capacity to be “a little pessimistic,” and that production of refined sugar “could exceed expectations.”

But Roney added that the users would be in an even worse position if Congress had adopted some of the changes to sugar policy that the Sweetener Users Association has advocated in recent years to reduce the sugar program that guarantees domestic producers a floor price and a percentage of the U.S. market.

The U.S. sugar industry used to have 104 production plants, but now has 45. In a normal weather year, the U.S. industry produces about the same amount of sugar as 30 years ago due to greater efficiencies, Roney said.

One of the complications in analyzing the expected supply is the uncertainty over whether Mexico will be able to deliver the sugar that it is expected to send to the United States.

The Mexican industry hopes to supply the full amount and its required to tell the U.S. government of its expectations by end of the March, said Humberto Jasso, executive president of the Mexican Sugar Chamber.

“We will provide the U.S. with a responsible and timely response as to supply capabilities,” Jasso said. “If we can’t, (supply the sugar) we will say so.”

Sandra Marsden of the Canadian Sugar Institute noted that the bad weather that affected the U.S. Midwest extended to the Canadian sugar beet producing area of the province of Alberta.

Almost all Canadian sugar exports to the United States are in the form of sugar-containing foods, but Canada has excess capacity to refine the sugar it brings in from Brazil, Central America and other countries, Marsden said. Canada could supply the United with more refined sugar if USDA were to lift the import restrictions that limit the Canadian exports, as it has in the past, she added.

Jenkins concluced that he expects “a reckoning” in the North American sugar market between April and September.

INTERNATIONAL MARKET

At a separate panel on the international sugar market, analysts noted that the U.S. might be importing sugar from other countries in the midst of relatively high world prices.

James Liddiard, the senior vice president of AGrilion Commodity Advisers, noted that, as of Feb. 21, sugar prices were up in London and New York, partly in reaction to a smaller-than-expected crop in Thailand. But if Brazil shifts its use of cane from ethanol to sugar that could lower the world price, he said.

Discussing the possible impact of the coronavirus crisis on sugar markets, Tom McNeil, the managing director of Green Pool Commodity Specialists, said that even if the Chinese cannot travel or go to work, they still have to eat.

But Vince O’Rourke, the trade and market analyst for C. Czarnikow Sugar Inc., said that if the sugar price drops due to the coronavirus “you will see the whole ag board move down.”

McNeill said the unexpected U.S. need for about 500,000 metric tons of sugar won’t affect the market much because it’s not “on the same scale” as changes in production and demand in Brazil, India, China and other Asian countries. ❖


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