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Sugar quota increase not enough, say confectioners

By Caroline Scott-Thomas , 04-May-2010

The US Department of Agriculture (USDA) has said it will increase sugar quotas by 200,000 short tons in order to relieve supply pressure, but candy makers are still calling for more.

 

US sugar stocks have hit unprecedented lows, and have been steadily creeping lower each year. Industrial users recommend a 15.5 percent stock to use ratio, but last year the ratio slipped below 12 percent.

 

Members of the confectionery industry, as well as other sugar users in the food industry as a whole, have been filing pleas for increased quotas for some time, but without success. Despite sugar prices well above those of other countries, sugar growers still argue that US sugar prices are affordable.

 

Reacting to the announced increase in sugar quotas, president of the National Confectioners Association Larry Graham said: "NCA appreciates the US Department of Agriculture for recognizing the need for additional sugar supplies, but we believe a larger increase is appropriate…Before the department took this step, market analysts estimated that one million additional tons were necessary to get imports to roughly the same level as last year. Without these additional imports candy companies will continue to struggle with high prices and the worry that they may have to stop production if there are disruptions in the sugar supply."

 

While the system has come under criticism from food manufacturers, the American Sugar Alliance, a trade organization which represents sugar cane and beet farmers, has accused industry of trying to “flood the sugar market with subsidized imports so they can increase corporate profits.”

 

Meanwhile, the agriculture department said: “USDA will continue to closely monitor stocks, consumption, imports, and all sugar market and program variables on an ongoing basis.”

 

It has also left open the possibility that it may have to make additional adjustments to quota allowances to “prevent or correct market disruptions”.

 

US sugar policy was set with the 1981 Farm Bill and works on the principle that supply should not exceed demand. In order to achieve this, the government can restrict the amount of sugar that American sugar farmers can sell, restrict the amount that the US will buy to the level required by trade obligations, and divert excess sugar to ethanol production. The idea is that sugar prices should remain stable, but this has not been the case. Prices hit a 29-year high on February 1, when they reached 30.4 cents a pound. Raw sugar prices have since fallen by more than 50 percent.

 

Mexican sugar is the only sugar which is not subject to import restrictions in the US, as it is protected by the North American Free Trade Agreement.

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