ASA Symposium Report: Sugar Prices Hot Topic
Sugar producers from across the country are meeting this week to discuss everything from the Farm Bill to open trade with Mexico and the struggling WTO negotiations. But in the convention hallway, one issue has dominated conversation: sugar prices.
While commodity prices soar for corn, wheat, and soybeans, sugar prices have been stuck in idle for the past couple of years. And it's taking a toll on farmers and processors who are dealing with the some of the sharpest inclines in input costs in history.
"I am operating half out of judgment and half out of fear," explained Robert Green, a sugar farmer from North Dakota. "I am 54 years old. I've farmed all my life and was very comfortable with the business-until now."
Green usually purchases fertilizer in the fall, but was forced to make that purchase much sooner this year as prices are projected to continue to rise. The price he locked in was still double the price of last year, and locking in such a high price is a big gamble, especially if sugar prices don't begin to rise to help offset the cost.
Food manufacturers, on average, paid 25 cents for a pound of sugar in 2007. And while that price averaged 28 cents for the first six months of this year, it is still far lower than what sugar producers were receiving in 1990 and even 1980.
According to a report on sugar prices issued by the American Sugar Alliance at the 25th International Sweetener Symposium: "Sugar policy in the recently passed Farm Bill contains two new features that should aid with sugar price recovery and help alleviate some of the economic pressures facing sugar producers."
Those new features are a program to turn unneeded sugar imports into ethanol and a small rate increase on the loans sugar producers repay to the government with interest each year.
But this price recovery would have little impact on the price of sweetened products, the report noted, because sweeteners have little to do with a products' pricing. For example, the study showed that there is just one-penny's worth of sugar in a 90-cent chocolate bar.
Even if sugar prices went up three-quarters of one penny per pound-the amount that the loan rate will increase under the new Farm Bill-that candy bar would cost just 90.03 cents. And that's assuming that candy companies pass the higher commodity prices along, which is uncertain the report pointed out, considering food manufacturers have never passed along the savings they've seen from cheaper sugar.