The Sugar Beat

Sugar Surplus Situation Worsens

sugarware_6x4 Large food manufacturers trying to convince government officials to import more sugar got a dose of reality on Nov. 10 when the U.S. Department of Agriculture issued new market supply estimates.

Just when lobbyists for food conglomerates were claiming shortages and urging the Secretary of Agriculture to open the floodgates to subsidized foreign sugar, the USDA found an unexpected 181,000 tons of sugar on the market. This additional sugar—which was the result of better than expected sugarbeet production and additional imports—increased year-end surplus projections for the 2007/2008 crop to a lofty 16 percent.

This marks the second month in a row that the USDA has dramatically increased surplus estimates, and industry experts believe that further supply increases for the current crop could be forthcoming as U.S. harvest is completed and imports from Mexico come into focus.

In August, the USDA worsened the market situation by increasing the amount of foreign sugar that could enter the United States duty-free. At the time, the American Sugar Alliance warned that this announcement was premature and urged the USDA to wait for market conditions to materialize before importing unneeded sugar.

The sugar industry was correct in its warning, as domestic supplies turned out to be much more robust than the USDA originally estimated in August. Since August, sugar prices have plummeted as a result of the oversupplied market, creating financial pressure on sugar farmers who are already dealing with high input costs.

Despite the price drop, the USDA is under continued pressure from lobbyists for food manufacturers who are angling for further import announcements and subsequent price drops.

Lawmakers worked to add certainty to future USDA import decisions in the recently passed Farm Bill. That bill directs the USDA to wait until April 1—when domestic and Mexican crop figures are more concrete—before making adjustments.

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