Record prices ‘will leave America with no sugar’

Food manufacturers have warned that sweet-toothed Americans could be left bereft of sugar unless the Obama administration loosens import restrictions as the price soars to a 28-year high.

Mars, Nestlé, Krispy Kreme Doughnuts, Kraft Foods and Unilever have joined trade bodies and fellow manufacturers in a joint letter to the US agriculture department asserting that unless imports are increased, “our nation will virtually run out of sugar”.

The price has leapt by 80% this year, driven in part by excessive rain in sugar-producing Brazil and a poor monsoon season in India. Trade policy in the US caps the amount of sugar which can be imported in any given year without tariffs.

“Experts forecast unprecedented shortages without prompt action,” the manufacturers told agriculture secretary Tom Vilsack, citing a forecast from the government’s own statistical literature which predicts that the US will end the next fiscal year with less than 13 days’ worth of sugar on hand.

“Without a quota increase, consumers will pay higher prices, food manufacturing jobs will be at risk and trading patterns will be distorted,” said the letter, which is co-signed by the Consumer Federation of America, the Grocery Manufacturers’ Association and the American Beverage Association.

The US is the world’s fifth-biggest sugar importer, behind India, the European Union, China and Brazil, according to Leonardo Bichara Rocha, an economist at the International Sugar Organisation in London. But poor crops and rapidly growing demand are combining to create an expected two-year shortfall in global sugar production of 13m tonnes.

Bichara Rocha said high prices were likely to remain for some time: “There will be some supply response to the high prices but that will take at least 12 months. For the short to medium-term, we will continue to see high prices.”

The US restricts sugar imports to protect the income of its domestic farmers across the midwest, the south and the northern plains. The department of agriculture said it would continue to review market conditions to ensure “an appropriate safety net for growers” and a “stable supply environment”.

Alex Oliveira, a sugar analyst at broker Newedge USA in New York, said the price had risen to “ridiculous” levels but the outlook was highly uncertain: “People are talking about shortages for the next couple of years, but it’s a very weather-dependant commodity. If we get some improvements in weather over the next years, the situation could get better.”