Sugar Prices Rebound

Published online: Feb 09, 2010 American Sugar Alliance
This has been one of the wettest and muckiest harvest seasons that Louisiana cane farmer Todd Landry can remember. "Getting the crop out of the field has been a lot more expensive and a lot more difficult," he admitted. But Landry and the other sugar producers of south Louisiana are working overtime to cut the cane because, for the first time in nearly a decade, there's a hint of financial reward on the horizon. Fueled by a tightening of sugar stocks around the globe, sugar prices have inched upwards over the last six months. Increases have been less pronounced on the U.S. market, but after years of climbing input costs and weather-related disasters, Landry is pleased. "This is a recovery time for the sugar industry," he explained. "We're recouping losses from the past, repaying old debts, and reinvesting in our farms to make them more efficient for the future." The raw sugar prices that cane farmers depend on averaged 25 cents per pound in 2009, up from the 2008 average of 21 cents. And the refined sugar price food manufacturers pay rose from 32.5 cents to 38 cents per pound from 2008 to 2009. Of course, Landry cautions that these publicly reported prices are asking prices and don't necessarily reflect actual trading prices. The average raw price Louisiana cane farmers are receiving is closer to 24 cents, he said, which is quickly offset by this year's higher harvest costs. And very little refined sugar is trading right now, he explained, because large food manufacturers booked sugar purchases as much as a year ago at lower prices. This might explain why the temporary price increase on the U.S. sugar market doesn't appear to have had much of an effect on food companies or their products. At the All Candy Expo, hosted by the National Confectioners Association last summer, it was unveiled that the confectionery industry saw a nearly four percent gain over the past year despite a recession with strong chocolate and gum sales leading the way. And they predicted continued success moving forward. So far they've been right. Hershey's boasted a 5.9 percent sales increase in a July 2009 release, and subsequent profit announcements have remained strong. That same Hershey's release listed commodity prices as one reason for profitability, noting commodity prices were cheaper than their initial estimates. This good news appears to have reached grocery shoppers for the time being, too. Grocery chains applied tremendous pressure to food manufacturers to stop rising product prices after grocery bills shot up 2008. And price hikes have slowed, according to the USDA. In fact, a sampling of sweetened products in the grocery store next to the American Sugar Alliance headquarters turned up some cases of decreases for shoppers. This is exactly what sugar farmers like Landry want to hear. "Prices for farmers have rebounded, sugar supplies are strong, food manufacturers are making record profits, and grocery shoppers are getting a good deal on sweetened product," he concluded. "Sounds like a slam dunk to me." Visit www.sugaralliance.org