As Sugar Surpluses Grow, So Do U.S. Efficiencies

(ASA COEUR D’ALENE, Idaho) — Some countries are just now recovering from years of short sugar supplies, but the United States is sitting on decade-high sugar surpplies thanks, in part, to the current no-cost sugar policy.

Dan Colacicco, the director for dairy and sweetener analysis with the U.S. Department of Agriculture’s Farm Service Agency, said the current Farm Bill “requires the USDA to provide adequate market supply.”

He noted today at the 29th International Sweetener Symposium that the USDA must constantly analyze domestic crop conditions, expected imports from our biggest trading partner, Mexico, as well as global supplies to reach the correct balance.

This balancing act, he said, strives to make sugar affordable and readily available in a transparent and predictable process.  And the USDA is cautious so it doesn’t oversupply the market before Mexican imports and domestic production data is known, or undersupply the market at the year’s end.

Future USDA decisions on sugar policy management should also factor in improving efficiencies in the U.S. sugar delivery infrastructure, said Owen Wagner with LMC International, a global commodity consulting firm.

Over the past 15 years, “the U.S. sugar industry has undergone substantive changes that allow the industry to meet end-user demand with substantially lower, not higher, stocks,” he said.  “Producers and end-users alike have improved their inventory management, increasing efficiency, and minimizing idled stocks.”

Yields have grown because of better technologies, and vertical integration of the supply chain has greatly improved producers’ ability to meet consumer demand more quickly and consistently, Wagner explained.

Jack Roney, an economist with the American Sugar Alliance, believes LMC’s work shows that the current level of stocks in the United States is too high and should be allowed to fall in the future.  For perspective, the 1.8 million tons of surpluses on the U.S. market this year is enough leftover sugar to provide every American with 12 pounds on top of what they already consume.

And because U.S. sugar policy mandates that surplus be stored at the expense of sugar producers, not taxpayers, excessive carryover stocks will increase producers’ overhead costs as prices fall, Wagner concluded.  This creates a difficult financial environment to make investments in future efficiencies.