WASHINGTON—For U.S. bakeries, candy makers and other users of sugar, the high price of the sweet commodity has left them with a bitter taste.
The rise in sugar comes as these businesses also grapple with higher costs for cocoa and butter, coupled with an increase in the minimum wage, forcing some retailers to consider increasing prices for the first time in years after the holiday season.
"It impacts everyone that has a product that relies on a product like sugar," said Brian Ackerman, owner of The Parrot Confectionery in Helena, Mont., who uses sugar in some of his treats like Turkish Delight, brittle and other hard candies. "We haven't increased prices in the last two years, but we're getting to the point where we're going to have to do it again."
Sugar prices in the United States have jumped the past 18 months, to 24.6 cents a pound compared to 14.77 cents in the futures contract used to measure global prices. The increase in the United States comes even as a glut of the commodity globally pushed world prices last summer to their lowest level in more than five years.
Tonna Jacobson, owner of Tonna's Cakes in Brandon, S.D., said regardless of price she has no choice but to buy sugar for her popular cakes and cupcakes.
"As a business owner whose only products contain sugar, I don't have a choice," said Jacobson, who uses 300 pounds of sugar and powdered sugar each month. "I have to buy it. It's just like gasoline for our cars. You have to buy it if you are going to get anywhere or do anything."
The spread between the U.S. and world prices is largely the result of two key factors: a global surplus that has kept world prices down, and preliminary tariffs imposed by the U.S. government this year on Mexican sugar imports after U.S. producers claimed Mexico was flooding the country with cheap, subsidized product that cost them hundreds of millions of dollars a year.
As part of a deal reached between the two countries in October, but which has yet to be finalized, the tariff would end once an agreement is in place for Mexico to send less sugar to the United States and a minimum price is established.
While U.S. prices dipped following the pact, there are lingering concerns that American producers will be unable to meet the lost supply that used to come from Mexican importers, a fear that has helped prevent U.S. sugar from falling and closing the gap with suppressed world prices.
Dax Wedemeyer, a broker for U.S. Commodities in Des Moines, said the high domestic prices have been a boon to American sugar-cane and sugar-beet farmers who are receiving more for their crops. But he's expecting the gap between U.S. and world prices to widen in the near-term. As a result, sugar users could look elsewhere around the world for cheaper options, or when possible, use a substitute such as corn syrup, he said.
"Something will have to give, and it could be that (U.S.) sugar prices will have to come down or you'll see the demand start to wane if rising prices are showing up on consumer shelves," Wedemeyer said.
The United States is the world's fourth-largest net importer of sugar in the world, according to the industry. That comes even as the U.S. limits imports from major sugar producers such as Brazil by slapping import taxes on their shipments to protect sugar farmers and processors. The policies are meant to prevent price declines that would be harmful to U.S. farmers and producers.
Spokesman Kent Wimmer with Western Sugar Cooperative, which produces about 10 billion pounds of sugar a year in four states—including Billings and Lovell in Montana—said the cooperative is hopeful U.S. sugar prices increase more so it can "invest in our company and the farmer can make money" to allow them both to remain competitive.
"If you're operating at prices where you're operating at a loss or breakeven, you won't sustain," he said. "You've got to make a profit or you won't stay in business."
Montana is the country's fifth-largest sugarbeet producer, growing about 5 percent of the U.S. crop.
At Oh My Cupcakes in Sioux Falls, S.D., Amanda Feldkamp, the bakery's chief operating officer, isn't upset she is paying $771 for 1,200 pounds of sugar a month—up from $628 a year ago.
"If prices are higher because we're supporting growth of sugar in the United States, we are certainly willing to pay more for sugar if it's to support American farmers," Feldkamp said. "We're OK with paying more, and I'm certain that our customers are OK with paying a little bit more."
Source: www.usatoday.com