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The Honolulu Advertiser
Posted on: Sunday, October 30, 2005

High sugar cost may sour your holiday sweets

By John Schmeltzer
Chicago Tribune

CHICAGO — Your holiday cookies could cost more this year because post-hurricane sugar prices have surged to nearly double what they were a year ago.

Sugar is now selling at 42 cents a pound on the wholesale market, compared with 24.5 cents a pound a year ago, according to statistics compiled by Miller and Baking News, which tracks sugar prices for manufacturers.

"Prices have gone through the roof for all sorts of reasons," said John Cropley, a sugar analyst for LMC International in London, who said prices likely will continue rising through the end of the year because of the increasing demand from holiday baking and candy making.

Prices were on their way up this summer because of a poor sugar-beet crop in the Midwest. Damage to sugar processing plants and sugar-cane fields in Louisiana caused by hurricanes Katrina and Rita compounded the problem, creating shortages and sending prices skyward.

The sugar supply problem is coming at a bad time for Chicago's candy industry, one of the largest in the country, as local companies are trying to ramp up production for the strongest three months of the year for candy sales.

"I've missed three full days of production because I couldn't even buy it at 42 cents because it was not available," said Mark Puch, president of Primrose Candy Co. in Chicago. Primrose had a yearlong contract for sugar at 27 cents that expired Sept. 30.

Sugar is a leading cost for Primrose, which makes hard candies, lollipops, starlight mints and butterscotch under contract to some of the largest U.S. candy companies. It made better financial sense to shut down production until it could get better-priced sugar.

And prices are pinching at all levels.

The larger companies usually lock in prices with contracts but buy some on the spot market. And even the casual cookie maker will see the change. It is unlikely that shoppers will find sugar specials this year because of the shortages, said Brian O'Malley, president of New York City-based Domino's Foods.

O'Malley said the company would be running its sugar refineries at "full bore" in an effort to meet the demand.

A year ago, Domino sugar was less than $2 for a 4-pound bag and could be bought in the Chicago area for as little as 99 cents. On Wednesday, a bag of Domino sugar was priced at $2.29 at Jewel, Chicago's largest grocer. Bargains can still be had, however. Jewel is selling Crystal Sugar for $2.19 for a 4-pound bag, or two 4-pound bags for $3.

To ease the strain, the U.S. Department of Agriculture in August and September released 500,000 tons of sugar from reserves being held by producers and allowed the import of 371,000 tons from Mexico.

It also increased the amount of Mexican sugar that can be imported in fiscal 2006 to 276,000 tons.

The United States is the world's fourth-largest sugar producer. But it is the largest user, consuming 10 million tons of refined sugar annually.

For Ron Pavelka, the owner of the Bridgeport Bakery in Chicago, however, the efforts to increase the supply were too late.

"I've been trying to eat a little bit of the higher prices, but now it is going to affect us more," he said. He is now passing on some of the increase to customers. "I am now paying $23 for a 50-pound bag."

Catherine Giannos, 67, of Elmwood Park, Ill., said she is hoping she won't have to cut back on her holiday baking or the baking conducted by members of St. Nicholas Albanian Orthodox Church in Chicago.

"We like to keep our traditions so we can teach our children," she said. "I am on my way to the store now and will check on the prices."