Adverse weather affecting sugar beet and sugar cane production areas has prompted the U.S. Department of Agriculture to take steps to guarantee an adequate supply to the U.S. market.
The agency said in a release it would announce by Dec. 10 the quantity, type and source of the additional sugar that will be needed to make sure there's enough for the domestic market and to avoid forfeitures and prevent or correct market disruptions.
According to this month's World Agricultural Supply & Demand Estimates Report, U.S. sugar production is projected to drop by 572,000 short tons of raw value from October, while ongoing weather concerns threaten further reductions, the USDA said.
Until the USDA makes its announcement, it's hard to tell what specific actions the agency intends to take to shore up sugar supplies in the U.S. It could be a combination of tapping into existing stockpiles and increasing imports from Mexico and India, both of which have a sugar surplus. The USDA also has disaster assistance and emergency loan programs to help farmers out in certain situations, so that could be another part of the response.
No matter which options the USDA chooses, fluctuations in sugar supply and price are likely to impact makers of food and beverage products. According to Investopedia, sugar is well known for price swings — ranging from 2 cents to 66 cents per pound during the past 40 years — because of the growing, processing and distribution systems involved.
More than half of the 8 million tons of sugar produced annually in the U.S. comes from sugar beets, and 60% of them are grown in Minnesota and North Dakota, The Food Institute said. Sugar beets account for between 55% and 60% of total domestic sugar production, according to the USDA's Economic Research Service.
In contrast, the U.S. produced 31.1 million tons of cane for sugar in 2017, the Agricultural Marketing Resource Center said, comprising about 40% to 45% of total production. Most of the sugar cane grown commercially comes from Florida, Louisiana, Hawaii and Texas.
Recent weather has seriously impacted Minnesota sugar beet farmers, according to Minnesota Public Radio. First, fields were too wet to get the beets out of the ground, and then the freezing weather that followed left about one-third of the crop frozen in place. Farmers now have to pay a sugar cooperative for every unharvested acre, which means another financial headache in addition to their crop losses.
Meanwhile, inconsistent supplies and closure of a deep water port where raw cane sugar was delivered is leading to the impending closure of a refinery in Michigan. Crain's Detroit Business reported the plant annually processes between 80,000 and 100,000 tons of raw cane sugar into liquid, specialty and brown sugars for food manufacturers.
To avoid swings in price and supply, some manufacturers may look more closely at sugar alternatives. According to Mintel, natural sweeteners, including stevia, are growing in popularity, but 64.4% of consumers positively rate honey as the healthiest natural sweetener. Still, 33% of them view raw cane sugar the same way, so it may be difficult to simply shift to another sweetener when so many consumers prefer the real thing.
People often seem conflicted about sugar. They like it, yet they're concerned about how much they eat and drink and the potential health issues — diabetes, obesity and cavities — linked to it. As a result, per capita consumption of sugar and other caloric sweeteners declined in 2017 for the third straight year.
Nevertheless, the indulgence factor associated with sweetness remains, which has led some food makers to actually ramp up sugar content in their products. This is particularly true of cereal companies such as Post Holdings, General Mills and Kellogg.
Because sugar is so popular and unlikely to fade away as other options emerge, companies needing to guarantee their supply are going to figure out how to keep it constant regardless of what USDA does. If sugar costs get too out of hand, however, manufacturers may have an incentive to try out some other sweetening ingredients instead.