Large U.S. food companies have been pushing the Obama administration to ease sugar import curbs, threatening higher consumer prices and possible job losses, citing forecasts for unprecedented sugar shortages.
In a letter to U.S. Agriculture Secretary Thomas Vilsack dated August 5, companies and groups that include Kraft Foods Inc, General Mills Inc and Hershey Co warn that our nation will virtually run out of sugar, if a USDA forecast is accurate.
But the letter was written a week before the Agriculture Department said Wednesday that the closely watched stocks-to-use ratio in the U.S. sugar market for 2009/10 stood at 6.7 percent, up from 3.4 percent in last month's report.
The situation is seen easing because of increased beet sugar and cane sugar production, according to the USDA.
Still, the USDA prefers the stocks ratio at 15 percent and a figure below that level has been used by the government as a reason to order imports, as it did in August 2008.
A spokeswoman for the Sweetener Users Association, a group that represents companies that use sugar and trade associations for those companies, said the group has not yet reacted to Wednesday's new USDA report.
Food industry analysts see inflation as a whole contained for an industry that in the past year sharply increased prices as costs for commodities such as vegetable oil, wheat and corn surged.
Many of those prices have since fallen and in fact, manufacturers are now in a position of trying to defend the price increases as consumers and retailers try to rein in costs in a weak economy.
For every ingredient that has gone up in price, there's probably two or three that have gone down in price, D.A. Davidson analyst Timothy Ramey, said.
Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico.
American sugar growers reject claims by confectionary companies that the United States is running short of sugar, arguing that supplies will improve as the U.S. beet and cane harvest gets underway. In the case of cane, that would be later this month and beets are harvested at the start of October.
There is absolutely no shortage of sugar here, Jack Roney, director of economic and policy analysis of industry group American Sugar Alliance.
Supplies from domestic harvest are about to flood the market, he said. If we run short, we can increase the TRQ, he said, referring to the tariff import program under which more than 20 countries take part in importing sugar to the United States.
Shares of Kraft were down 6 cents at $28.44 on Thursday on the New York stock Exchange, while General Mills' were down 48 cents at $57.36 and Hershey's were down 2 cents at $38.36.
(Additional reporting by Rene Pastor in New York and John Tilak in Bangalore; Editing by Clarence Fernandez and Lisa Shumaker)