• Submitted by: manso
• International
• 08 / 23 / 2010

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Limits on Foreign Producers Will Ease to Raise Shipments

Global sugar prices soared on Friday after the U.S. said it will ease import restrictions to help avert a national shortage.

The U.S. Department of Agriculture on Thursday said it will give foreign sugar producers a bigger window to send sugar to the U.S. over the next two months.

World prices for raw sugar reached a five-month high on Friday, rising above 20 cents a pound during the day. Sugar for October delivery finished 2.4% higher at 19.95 cents a pound.

The USDA was responding to intense lobbying from sugar users, who claimed the country was in danger of running out of sugar. The USDA this year has twice increased its import quota at the behest of sugar processors and food manufacturers.

The sugar users have long been vocal critics of the government's restrictions on sugar imports, which they argue are designed to protect American farmers by keeping U.S. sugar prices inflated.

Farmers counter that the food companies are just seeking ways to boost profits. U.S. domestic sugar prices are at about 34.13 cents a pound, up 30% in 12 months.

Last week, the Sweetener Users Association, which represents large food and beverage manufacturers, sent a letter to Under Secretary James Miller of the USDA requesting early entry of next year's sugar imports, "commencing immediately."

Globally, sugar prices have surged more than 45% since the beginning of May, largely due to weather-related port delays in Brazil, the world's biggest sugar exporter, combined with a spike in demand from the Middle East and Asia during to the month-long Ramadan religious holiday. Also, floods in Pakistan ruined sugarcane crops there.

"Supply remains relatively tight in the U.S.," said Patrick Henneberry, senior vice president of commodities at Imperial Sugar Co., one of the largest refiners in the country. The USDA's decision makes it easier for some smaller exporters to ship more sugar to the U.S., he said.

Sugar is the second-most common ingredient in many bread products, and bakers are distraught over high prices, said Robb MacKie, president and chief executive of the American Bakers Association.

The fall is the peak time of sugar use, as many manufacturers start to build up inventories of finished products to go into the winter.

"It's kind of an 11th-hour rescue," said Robert Lindon, executive vice president of Connell Commodities, a Naperville, Ill., advisory firm for food commodities. "In the next six weeks, I think we are going to be very, very tight."

Global sugar demand is expected to outstrip supplies by 8.5 million metric tons in the current crop year that runs through Sept. 30, the London-based International Sugar Organization has said. In the following crop year, supplies may outstrip demand by 2.5 million tons, it said.

The U.S.'s ability to tap the broader market is limited by longstanding import restrictions set by law. The so-called tariff rate quota is set every year at slightly more than 1.2 million tons, and the USDA can raise it only in April following the start of the fiscal year in October.

The long-term outlook for the U.S., however, is complicated by an Aug. 13 court ruling that revoked the USDA's approval of genetically modified sugar-beet seeds.

COFFEE: Futures shot to their highest in 13 years as supplies of top-quality arabica beans from Central and South America remain scarce and as Brazilian growers sit on the sidelines awaiting even higher prices. Coffee beans for September delivery rose 4.25 cents, or 2.4%, to $1.8155 a pound on ICE Futures U.S.

By CAROLYN CUI And BILL TOMSON

Tom Sellen contributed to this article.

WALL STREET JOURNAL
* COMMODITIES
* AUGUST 21, 2010

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