LOS ANGELES, CA – The price of sugar on world markets has skyrocketed this year, and a coalition of food manufacturers, including Hershey, Kraft, Mars and Unilever, has warned of a pending shortage and asked the Agriculture Department to ease import quotas, the Los Angels Times reports.
Analysts say that fears of empty supermarket cereal and candy shelves are overstated and that the grim outlook painted by big food companies is part of a bigger effort to pressure the government into dismantling sugar trade barriers.
Sugar prices have jumped 72 percent in the past six months, with weather issues in India and the diversion of Brazilian sugar cane to produce ethanol contributing to the increase.
The coalition sent a letter to Agriculture Secretary Thomas Vilsack, warning of “unprecedented shortages” and predicting that without raising the quotas on sugar imports, "consumers will pay higher prices, food manufacturing jobs will be at risk and trading patterns will be distorted.”
There is debate as to whether the rise in sugar prices is a sign of an imminent crisis. The USDA said that sugar prices in the U.S. have risen just 15 percent from a year ago.
"I do not think there will be a severe sugar shortage for U.S. food manufacturers in the near future," said Tom Graves, a Standard & Poor's equity analyst who follows the big food companies. He said that the food company warning was more about politics than price spikes or shortages.
Except for Mexico, U.S. trading partners are limited to exporting a cumulative 1.3 million metric tons of sugar to the U.S. this year. The U.S. consumes about 10 million metric tons of sugar annually.
Food companies contend that raising that quota will increase supply and decrease prices. Sugar producers refute that and say that increasing quotas could drive them out of business.
The USDA has for now stayed above the fray, with spokesman Justin DeJong saying that the agency would "continue to monitor market developments."