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 needed to ensure there's enough supply for the domestic market, 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 in certain situations.
No matter which options the USDA chooses, fluctuations in sugar supply and price are likely to impact food and beverage manufacturers. 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. Sugar beets account for between 55% and 60% of total domestic sugar production.
In contrast, the U.S. produced 31.1 million tons of cane for sugar in 2017, comprising about 40% to 45% of total production. Most of the sugar cane grown commercially comes from Florida, Hawaii, Louisiana and Texas.
Recent weather has seriously impacted Minnesota sugar beet farmers as well. First, fields were too wet to get the beets out of the ground, 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 processes between 80,000 and 100,000 tons of raw cane sugar annually 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 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.
Because sugar is so popular and unlikely to fade away as other options emerge, companies need to figure out how to keep their supply constant regardless of what USDA does to safeguard it. If sugar costs get too out of hand, however, manufacturers may have an incentive to try out some other sweetening ingredients instead.