The burning economic question… Who moved the Snickers?

Price of gas going up?  No problem. House values slumping? That’s old news.  Harder and harder to get a job these days? Bah!   Sure all these economic woes are disconcerting. But if you want to see a real brawl at the vending machine around 3 p.m., wait till the Snickers bars are replaced with raisins and dried figs.  Soon, Americans might be facing yet another shortage, and this one feels very personal.

 
The price of sugar is at a 28 year high. On the world markets, it has risen 72 percent in the last six months (to 22.2 cents per pound).  Domestic sugar wholesales for about 35.5 cents a pound, which is up 15 percent from last year. At this rate, not only will your favorite snacks cost more, but some manufacturers are speculating that the snacks will disappear off the shelves altogether.  And there is no satisfying alternative that can fix this problem.  When gas prices hike, you can carpool or take the bus or walk. Lose your job and/ or your house, and you can move into your mother-in-law’s basement.  But what do you do when life gets you down and you can’t find - or can’t afford - the late afternoon box of chocolate covered Whoppers or a pint of Haagen Dazs Reserve Caramel Bar ice cream?  That’s a scenario nobody wants to witness.  
 
To stave off that possibility, giants in the food manufacturing industry like Kraft, Hershey, General Mills, Mars, and Unilever are beseeching U.S. Agriculture Secretary, Tom Vilsack to increase the quotas on sugar imports and to lift the tariffs.  The Ag Department seems to back up the contention of the manufacturers when it estimates that America’s sugar supplies should drop by about 43 percent by next year.  In a letter to Vilsack, the coalition of companies warned of "unprecedented shortages,” and predicted that if something isn’t done, “consumers will pay higher prices, food manufacturing jobs will be at risk and trading patterns will be distorted."
 
Presently all foreign sugar producers (except for Mexico) are limited to exporting no more than a combined total of 1.3 million metric tons of sugar to the United States annually. Mexico exports about the same amount to us.  If that sounds like a lot, you should know that the American appetite for sugar… the drug of choice for so many of us,   equals about 10 million metric tons per year.
 
The non-domestic sugar production industry has suffered from too much rain in some countries and too little in others.  Plus, Brazilian sugar has been diverted in large part to make ethanol.  Those factors have driven up the price of sugar on the world market.
 
What is the Ag Department planning to do about this pending calamity? Perhaps nothing. Whether or not there is a real threat of a sugar shortage seems to depend on who you ask.  The American Sugar Alliance (which is the trade group representing sugar farmers) says the last thing we need is increased imports. That would glut the supply and drive down the price… something they definitely want to avoid.
 
Tom Graves, a Standard & Poor’s equity analyst who follows the food industry suggests that the issue is more about the politics of sugar quotas than about true shortages or price increases. He said, "I do not think there will be a severe sugar shortage for U.S. food manufacturers in the near future."

 

While many smaller food manufacturers have noticed a significant jump in the price of sugar, in general, they seem unalarmed. They note that the price increases were foreseeable  and that most companies that rely heavily on sugar planned far enough ahead so that they won’t suffer in the short-term.  Even so, the giant food manufacturers are biting their nails, insisting there is a problem, and wondering if Uncle Sam is going to come to the rescue. 
 
With all parties approaching the issue from different sides, the jury seems to still be out on whether or not there really is a sugar crisis percolating.  But nobody is addressing the burning question:  if sugar prices continue to skyrocket, how will America feed its 3 p.m. need for sugar?   
 
Should we be talking Sugar Bailout?

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