Sugar price increases put food makers on alert

Big companies warn of a shortage and ask the U.S. to ease import quotas. Domestic sugar producers say there's plenty available and that raising quotas could drive them out of business.

The price of sugar on world markets has soared this year, prompting a coalition of the nation's largest food manufacturers to warn of a pending shortage and to ask the Agriculture Department to ease quotas on imports.

But although prices have risen domestically and abroad, analysts say fears of empty supermarket shelves are overblown and that the gloomy outlook of big food companies is really part of a larger effort to pressure the government into dismantling sugar trade barriers.

The futures price of sugar traded on world markets closed at 22.2 cents a pound Thursday, down about a penny from the previous day but still up 72% in six months. Weather problems in the sugar-producing regions of India, the diversion of Brazilian sugar cane to produce ethanol, and a growing global sweet tooth are behind the increase, according to analysts.

In a recent letter to Agriculture Secretary Thomas Vilsack, the group warned of "unprecedented shortages." Without higher quotas on sugar imports, "consumers will pay higher prices, food manufacturing jobs will be at risk and trading patterns will be distorted," the food companies said.

There is considerable debate about whether the run-up in sugar prices is a sign of a looming crisis. Just a fraction of global sugar supplies is traded on international markets. And according to the USDA, the wholesale price of sugar in the United States has risen by just 15% from a year ago to a little under 35 cents a pound.

Here is an update from the trading newsletter I received regarding what the increase in Sugar prices portends for commodities in the near future...

Can you believe sugar??! Almost 23 cents a pound? S was 12 13cents in April.

Think it's an (what do they call that in those academic/thinktank circles?) anomaly?

NOT.

View sugar, instead, as a bellwether for what's about to happen w most prob all commodities and natural resources- rice wheat iron ore copper- you will live to see $5.60 copper much sooner than people can possibly imagine- throughout the coming decade. Most sugar co's are either private or they stink as investment-grade stocks, but Ag ETFs and Ag futures ETFs are set to score plenty here.

Meanwhile: out there in America, ordinary people are angry, and going still further out on a limb: those creditcard 'checks' that come in the mail (write a check, your bank- JPM etc etc) will cash it and place that balance on yr credit card @ an 'introductory' rate) are being used by many many people to pay electric bills buy groceries make car payments etc. This will have an End-of-the-Line critical mass point somewhere in the not-too-distant future and when this happens

Americans' circumstances- as we have been addressing in our MW Third World America comments for what five years??!- will worsen. And that's what's ahead, not a 'recovery.' Recoveries are cyclic...and that is not what's going on.

Drive through the commercial-retail zone of any American town--a Calif beach town, a county-seat grain-elevator county seat in Nebraska--and what you will see is storefront after storefront, empty, vacant, with for lease signs up or for sale signs up, an entire noah's ark raftful of small business failures, punctuated by the occasional convenience store advertising a $227 million MegaMillionsŽ jackpot.

But although ordinary Americans are not participating in it, money- not the'credit' stuff that comes in the mail from JPMorgan Chase in the form of those credit-card 'checks' but real wealth which we talk about issue after issue in MW- goes right on.

We've barely even begun to tap into the implications of the July 20-Aug 10th 'global 500' issue of Fortune.

Here are just a few things, from that issue, to think about:

-of the 40 top companies with the highest profits of any companies on the planet, the companies that made the absolute most money, the top six, in order Exxon Gazprom Royal Dutch Shell Chevron BP & Petrobras, are oil and natural gascos. What does that tell you? That in an age that is supposedly 'green' the world is 'same as it ever was'??? Of those six compaies we own shares of in three: Shell Petrobras & Exxon.

Other interesting stuff: Russia's Gazprom moved from 22 to 2 in profitability rankings. Petrobras moved in ranking from 34 to 6th. This tells us that oil is hardly going away.

What will Big Oil do with these profits? Stuff that's pretty neat and which will keep Big Oil in control throughout the new century: more about that Sept 1st.

A BRIC validation: three of the top forty most profitable companies on earth are Russian. And Russia wont even begin to make serious money until the middle of the coming decade...

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