The Hagstrom Report

Agriculture News As It Happens

Analysts: Demand will keep sugar prices high


STOWE, Vt. — World sugar prices are likely to remain high due to world demand and the difficulty of increasing supply, analysts said at the American Sugar Alliance International Sweetener Symposium here last week.

Brazil has the most potential to increase the amount of land in production, said Stefan Uhlenbrock , a senior commodity analyst with F.O. Licht, a German analytical company. But Uhlenbrock said the price of Brazilian sugar is likely to remain high because the cost of production there has doubled due to the strength of the real, the Brazilian currency.

The land that Brazil can put into production is not as productive as older sugar ground, and the cost of transportation from the newer areas is also higher, he added.

Thailand, India and Indonesia could increase the size of their crop through better “crop care,” Uhlenbrock said.

Sugar prices vary from country to country. "In the United States, refined sugar prices are 55 cents per pound, although sugar producers point out that this is an asking price, and that the final price negotiated between food manufacturers and sugar companies is much lower," a spokesman for the American Sugar Alliance said. He noted that sugar prices averaged 32.5 cents per pound in 2008 and that past highs included 56 cents in 1974 and nearly 52 cents in 1980.

Analysts and the Sweetener Users Association contend that, even though the U.S. price is now much higher than the price at which sugar growers can forfeit sugar to the government, the price is still affected by the floor price and the Agriculture Department's tight management of import quotas to avoid forfeitures.

Frank Jenkins, a Wilton, Conn.-based sugar analyst, said that bakers and other sweetener users are paying higher prices for all commodities but that, while the market has determined that the prices for other commodities are high, the reason the sugar price is so high is U.S. government policy.

Randy Green of the Sweetener Users Association said sweetener users believe that USDA should allow more imports, but that they want a balanced approach rather than a surplus of sugar.

Owen Wagner, senior North American sugar economist with LMC International Ltd., said at the conference that his research shows the U.S. beet sugar industry is the most efficient in the world.