Imperial to increase sugar prices

By Lorraine Heller

- Last updated on GMT

Related tags: Sugar, Sugar beet

Imperial sugar yesterday reported a strong sales increase in its
first quarter, boosted by increased consumer and foodservice prices
on the back of a tight domestic sugar market. And with the supply
situation still uncertain, the refined sugar giant said food
manufacturers are next in line to face higher prices.

Net sales for the quarter ended December 31 2005 increased 18.3 percent to $254 million, compared to $215 million last year.

Domestic sugar prices increased 9.3 percent in the quarter, driven by a smaller sugarbeet crop, delays in the start of the harvest in some areas and the impact of gulf coast hurricanes, said the company.

But food manufacturers on the whole have escaped increased prices so far, as a "significant portion"​ of industrial sales are under fixed price forward sales contracts for up to a year, said Imperial Sugar.

However, the company now notes that it expects "industrial prices and margins for the remainder of the fiscal year to increase due to the new contracts that have been executed and those remaining to be booked."

The tight domestic sugar market recently prompted the industry to yet again call for extra imports in order to avoid shortages on the market.

In December, the US Department of Agriculture (USDA), announced it was to allow 450,000 tons extra sugar imports into the country, only half the amount asked for by the nation's Sweetener Users Association (SUA), which represents manufacturers of products that use sugar.

And just a few weeks ago, the SUA again appealed for more imports after the USDA's latest World Agricultural Supply and Demand Estimates (WASDE), revealed ending stocks for US sugar supplies for 2005-2006 are set at 1.3 million tons, or 75,000 tons lower than the previous month's estimates.

Imperial Sugar's president and chief executive officer Robert Peiser yesterday said that "shortages of refined sugar are certainly possible and even the availability of raw sugar is uncertain until such time as the USDA provides for a higher level of raw sugar imports."

"The sugar industry has once again demonstrated its tendency to shift direction quickly as market conditions changed dramatically following various summer events. On the negative side, operations throughout the Southeast were severely impacted during the post-hurricane period, leading to disruption of deliveries and increases in the cost of transportation and supplies, at the same time that energy costs used in our manufacturing process increased significantly. On the other hand, the supply situation within the industry changed significantly and, as a result, we were able to increase prices in order to recover our higher costs,"​ he said

"We expect the industry to continue to experience volatility as increases in the price of raw sugar have accelerated in recent weeks. If such trends continue, it will be necessary to effect future consumer and foodservice price increases in order to preserve our margins,"​ he added.

But it may not all be bad news for food manufacturers. Although tightened sugar supplies have contributed to general price increases for the commodity this year, there are signs that the situation may improve.

According to the USDA, the average lower range price for beet sugar has decreased to 34 cents per pound, compared to 40 cents per pound between September 2 and December 9. However, this is still significantly higher than last year's price of 23 cents.

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