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Sugar growers, sweetener users spar over stocks-to-use ratio

COEUR D’ALENE, Idaho — Since 1996, the Agriculture Department has aimed to maintain a 14.5 percent ending stocks-to-use ratio for refined sugar as to make sure there is enough sugar on hand but not so much that prices fall below forfeiture levels, which would mean that growers could turn over sugar to the government and get payments for it.

Now the Sweetener Users Association is encouraging Congress and the USDA to set the stocks-to-use ratio at 15.5 percent, while Owen Wagner, an analyst working for the growers, said here the ratio could be reduced below 14.5 percent because “just-in-time” deliveries make the current ratio antiquated. The issue is further complicated by uncertainties about the amount of sugar that Mexico will send to the United States.

Sweetener users have said that a maintaining a higher stocks-to-use ratio would assure them of a steady supply of sugar, while sugar growers have said that raising the ratio would cause them to incur higher storage costs and lower prices.

At the American Sugar Alliance International Sweetener Symposium here on August 6, Wagner, the senior economist for LMC International Ltd., presented an ASA-funded study that concluded USDA could lower the ratio goal due to technical changes in the industry that allow for easier delivery.

Wagner said the shift of beet processing plants into co-operatives, increasing farm size, and improved inventory management have all led to a more reliable supply of sugar.

But Thomas Earley, a vice president of Agralytica, an Alexandria, Va. consulting firm who serves as an economist for the Sweetener Users Association, said there were “a number of flaws” in the LMC study.

Earley said the growers do not experience higher storage costs because they already have storage capacity. He also said he did not believe that Wagner had provided “hard evidence” that the current or higher stocks-to-use ratio is not needed.

The 14.5 percent stocks-to-use ratio is not codified into law, but USDA appears likely to maintain it as a goal, particularly since the market has become more uncertain since Mexico can send unlimited amounts of sugar to the United States under the North American Free Trade Agreement.

Mexican bottlers also have been converting from sugar to U.S-produced high fructose corn syrup, and it is uncertain whether Mexico will increase its HFCS use, because the drought in the United States has led to higher-priced syrup.