The Sugar Beat

The vast majority of sugar marketed in America is sold well below the spot prices commonly reported in the media, a sugar executive said at the recent annual Outlook Forum hosted by the U.S. Department of Agriculture (USDA).

Although company sales data is proprietary, sugarbeet companies are selling sugar for an estimated 25-30% cheaper than what the USDA reports as average prices, said Inder Mathur, the CEO of Western Sugar Cooperative and the featured speaker at a session on sugar.

Most food manufacturers booked this year’s sugar purchases months in advance at lower levels, and few ever pay the asking price, he noted.  The same situation occurs in sugarcane-producing regions, too.

Jim Simon, the general manager for the American Sugar Cane League, which represents the Louisiana sugar industry, says producers expect to sell this year’s raw sugar crop for between 23.5 cents and 24 cents per pound.  

“This is an improvement from the 20.5 cents seen in previous years, but is certainly not a windfall,” he explained.  The publically reported raw price was close to 40 cents per pound last month, and the average price for 2009 was under 25 cents.

The price of sugar, which had been stagnant for more than two decades, has recovered over the past year.

“Prices are still below levels seen in 1985 when they are corrected for inflation,” Mathur told Forum attendees.  “And world prices have risen twice as much as domestic.”  Sugar shortages around the globe have led to steep price increases worldwide.

He also noted that 23 years of flat prices in America combined with higher input costs have led to contraction and consolidation within the U.S. industry.  In fact, 54 sugar mills and refineries have closed since 1985, according to the American Sugar Alliance.

“If the recent price recovery can be sustained,” Mathur concluded, “producers might be able to improve returns over past years, reduce their debt load, re-invest, continue to improve efficiency, and stay in business.”

And that, he said, is important to sugar producers and food manufacturers alike.

Western Sugar Cooperative is a farmer-owned company that operates five sugarbeet processing facilities in Colorado, Montana, Nebraska, and Wyoming.