US department of agriculture sugar-market economist John Love has predicted that producer prices for sugar for 2002/03 will be 5 per cent higher than last year's. Speaking at the 20th annual International Sweetener Symposium, held from 2 to 6 August, he also said that production could be nearer 1997-99 levels.
He did not, however, expect any significant rise in consumer prices for sugar. At the conference, American Sugar Alliance chief economist Jack Roney also noted that retail sugar price has virtually unchanged since 1990, and is about 22 per cent below the average consumer price in other developed countries.
"Producer prices were sharply lower, near 20-year lows, during much of the 1999-2001 period," said Roney. "The low prices caused wrenching adjustments, but the industry is leaner, more efficient, and better structured now for the formidable challenges that lie ahead."
According to Roney, these include continuing to reduce costs to cope with flat nominal and sharply lower real prices, defending sugar consumption against further decline, and trade policy threats from foreign countries that wish to claim a larger share of the US market. In addition, a number of sugar beet and cane mills have been forced to close over the past few years.
"Beet and cane growers saw independent beet processors and raw sugar refiners exiting the business because of low prices," Roney said. "Desperate to still have a place to process and market refined sugar from their beets and cane and to achieve a higher value-added for their product, these farmers went more deeply into debt to protect life-long investments in their growing operations. Joining together cooperatively to purchase these beet factories and cane refineries was the one way to guarantee these operations, and growers who supply them, would survive."
Competition within the industry remains fierce. The three largest refined sugar sellers accounted for 76 per cent of production capacity in 1999, but their share has dropped to 72 per cent this year and will, according to Roney, decline to 69 per cent in 2004.
A major factor in the restoration of balance in the US market, in addition to a downturn in production because of beet and cane mill closures and bad weather, was the adoption of the 2002 Farm Bill. Roney believes that this was the right choice for the US sugar industry.
"It is the market oriented answer to the problem of oversupply, with sugar farmers accepting no government payments, and taking on the burden of storing excess sugar, at their own expense, when the government perceives that the market would otherwise be oversupplied," said Roney.
However, he warned that this could be jeopardised if the US gives away too much in trade negotiations currently under way. Past concessions, he believes, have already made the US sugar market one of the most open in the world.
"The industry must caution US trade negotiators that further concessions could plunge the market back into a period of over supply, low prices, and government costs," he said.The American Sugar Alliance is a national coalition of growers, processors and refiners of sugarbeets, sugarcane and corn for sweetener.