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The Honolulu Advertiser
Posted on: Friday, August 14, 2009

Spike in sugar prices stirs debate


By Jerry Hirsch
Los Angeles Times

Hawaii news photo - The Honolulu Advertiser

Weather problems, diversion to ethanol production and a growing global sweet tooth have pushed up sugar prices.

ADVERTISER LIBRARY PHOTO | 2006

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The price of sugar on world markets has soared this year, prompting a coalition of the nation's largest food manufacturers to warn of a pending shortage and to ask the Department of Agriculture to ease quotas on imports.

Although prices have risen domestically and abroad, analysts said fears of empty supermarket shelves are overblown and that the gloomy predictions of big food companies is really part of a larger effort to pressure the government into dismantling sugar trade barriers.

The futures price of sugar traded on world markets closed at 22.2 cents a pound yesterday, down about a penny from the previous day but still up 72 percent in six months. Weather problems in the sugar producing regions of India, the diversion of Brazilian sugar cane to produce ethanol and a growing global sweet tooth are behind the increase, according to analysts.

Hawai'i's sugar industry has been declining since the 1970s when the land devoted to sugar cane cultivation was nearly 240,000 acres. By 2007, that had fallen to about 40,000 acres, according to the State Data Book.

There are two sugar producers in operation in Hawai'i, Hawaiian Commercial & Sugar Co. on Maui and Gay & Robinson Inc. on Kaua'i. But Gay & Robinson has said it will stop producing sugar next year. The company said it is considering a joint venture to convert its Kaumakani sugar plant into an ethanol plant.

In a recent letter to Agriculture Secretary Thomas Vilsack, a group of food companies warned of "unprecedented shortages" of sugar. However, there is considerable debate about whether the run up in sugar prices is a sign of a looming crisis. Just a fraction of global sugar supplies are traded on international markets. And according to the USDA, the wholesale price of sugar in the United States has risen by a much smaller amount, just 15 percent from a year ago to a little under 35 cents a pound.

With the exception of Mexico, which the North American Free Trade Agreement freed from quotas, U.S. trading partners are limited to exporting a combined 1.3 million metric tons of sugar to the United States this year. Mexico will account for about the same amount of U.S. sugar imports.

The United States consumes about 10 million metric tons, according to the American Sugar Alliance, a trade and lobbying group that represents sugar farmers.