Tragic Refinery Fire Will Not Cause Sugar Shortage

Published online: Mar 03, 2008 American Sugar Alliance-Phillip Hayes
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Officials from the beet and cane sugar refining industry doubt the U.S. Department of Agriculture (USDA) will need to increase imports in the wake of the tragic fire that rocked the Imperial Sugar refinery in Savannah, Ga. earlier this month. "Obviously, the top priority of everyone in the sugar industry right now is helping Imperial through this difficult time," said Margaret Blamberg, the executive director of the American Cane Sugar Refiners' Association. "Just like the top priority for the industry, after the 2005 hurricanes, was to help people rebuild and get back on their feet." OTHER ISSUES Blamberg explains that the current market situation is much different than after Hurricanes Katrina, Rita and Wilma when the USDA imported sugar to avoid supply interruptions and long-term price hikes. "Luckily, the other sugar refineries in the country have excess capacity and can make up any shortfall until Imperial is up and running again," Blamberg said. "This was not the case when Domino Sugar's refinery in New Orleans went offline following Katrina." The Savannah refinery is the country's second largest refinery and accounts for nine percent of U.S. refining capacity. The Domino refinery in New Orleans is the largest refinery and was closed for four months in the hurricane's wake. There are other issues that make today's situation different, according to Blamberg. "After the hurricanes, the transportation system in the Gulf region was a wreck, which made deliveries of sugar to certain regions of the country much more difficult," she said. "There are no transportation situations right now." NAFTA The 2005 storms also destroyed a lot of Florida's and Louisiana's cane crops, which supplies the majority of the raw sugar used by the country's refineries. "U.S. cane farmers are having excellent crops this year," she pointed out. So are sugarbeet farmers in the Midwest. In fact, beet producers are currently storing more than 200,000 tons of surplus sugar. Alan Welp, president of the American Sugarbeet Growers Association noted, "This is a far cry from three years ago when droughts plagued the Midwest and intensified the sugar supply situation." "And there is one other huge difference this time around," Welp said. "Because of NAFTA, Mexico now has duty-free access to the U.S. market. If anything, the sugar industry is worried about having too much sugar on the market." Commodity traders agree. The price of refined sugar has remained relatively flat after the explosion in Savannah, and the price of raw sugar has even dropped. ADEQUATE SUPPLIES Given these factors, USDA officials admitted at a recent industry conference that they are unlikely to take market corrective actions in the near future as a result of the Imperial fire. "Once again, as a result of U.S. sugar policy, our nation's consumers and industrial food manufacturers benefit from the stability of adequate supplies of high quality sugar at prices lower than they were in 1980," Welp concluded. Editor's note: Hayes is the Director of Media Relations for the American Sugar Alliance, visit www.sugaralliance.org.