US food lobby wants more sugar from RP

US FOOD companies including General Mills Inc., Kraft Foods Inc. and ConAgra Foods Inc. want the US government to raise sugar-import quotas as inventories fell to a 34-year low and prices surged.

The Sugar Policy Alliance, which also includes Mars Inc., Krispy Kreme Doughnuts Inc. and Hershey Co., wants to import more from Brazil, the world’s largest producer of the sweetener, the Philippines and elsewhere, according to a letter sent to Agriculture Secretary Tom Vilsack.

Sugar futures have jumped $18.30, or 3.5 percent, to $537.20 a ton on the Liffe exchange in London on Friday, the highest closing price since the contract started trading 28 years ago.

Markets fear that the output of raw sugar from the world’s largest producers would drop on lack of rainfall and high fertilizer prices.

“Without allowing additional imports to enter the market, consumers will pay higher prices and domestic food manufacturing jobs will be at risk,” the alliance said in a statement over the weekend.

The Philippines is Southeast Asia’s second biggest sugar exporter after Thailand.

The ratio of sugar stocks to total use in the United States in the year that ends Sep. 30 will drop to 10 percent, the lowest since 1975, USDA data show.

“We’re closely monitoring market developments,’’ USDA spokesman Justin DeJong said in an e-mail.

Prices have soared as output dropped in India, the world’s biggest producer behind Brazil. India is also the largest consumer of the commodity. While refined sugar is up 69 percent this year, raw sugar has surged 75 percent.

As of last March, the Philippines was able to fill its 137,363-metric ton shipment to the US under the tariff rate quota program, according to the Philippine Sugar Millers Association.

For the current crop year ending Aug. 31, Philippine sugar output may reach 2.05 million MT, of which 10 percent is expected to be for the export market.

Sugar is the only major US crop under import restrictions to protect the domestic industry.

Imports are managed through Tariff Rate Quota programs for raw and refined sugar, limiting purchases from almost all countries.

With the Indian monsoon 64 percent below normal for the week ended August 5, prices at Vashi, India’s biggest wholesale-sugar market, rose to a record. China, the third-largest sugar producer after Brazil and India, said it might see a deficit of 1.5 million MT next year, according to an official from the National Development and Reform Commission.

“I remain cautiously positive as the market already discounted most of the bad news,” said Mehdi Chaouky, a research analyst in London at Diapason Commodities Management LLP, which has $6.5 billion invested in commodities.

“The weather pattern is amplifying the price move.”

Sugar production in India will be “considerably’’ below demand, estimated at 22.5 million tons white value, the International Sugar Organization said in a report on Friday. By October, stocks were expected to drop to 3 months of consumption.

India is expected to import 5 million tons in crop year 2009-2010, compared with an estimate of about 2.7 million tons this year, according to researcher Sucres & Denrees Group.

The country had contracts to import 2.9 million tons of raw sugar so far this year, said Farm Minister Sharad Pawar.

The global shortfall is projected to be 4 million tons next year, compared with a deficit of 8 million tons this year, according to Sucres & Denrees. –Alan Bjerga, Bloomberg