— Guyana monitoring situation closely
UNPRECEDENTED sugar shortages forecast in the United States and some other countries can send world prices up and Guyana is closely monitoring the situation, Agriculture Minister Robert Persaud said yesterday.

“The focus is to get as much into the European Union market before the final price cut bites at the end of September”, he told the Guyana Chronicle.

He said the government also wants to ensure adequate supplies for the local market.

“Any price movement upward is a positive trend for the long-term viability of our sugar industry”, he said.

Sugar remains Guyana’s largest foreign exchange earner and preferential prices for exports to the EU are due to end next month.

Persaud noted that some analysts feel global prices are likely to stay high in the coming year as India continues to rely on imports while recovering from the effects of a poor monsoon.

New Delhi has recently permitted duty-free import of raw and white sugar of up to 10 lakh tonnes (Department of Revenue notification dated July 31) which analysts say, has added fuel to the already raging fire in the global sugar market.

Persaud said the world market deficits will be to the benefit of the Guyana Sugar Corporation as it is a net exporter and is positioning itself for a new trading environment within the Caribbean Community (CARICOM).

He noted that the CARICOM trading environment is protected by the Common External Tariff which shields the region from the influences of the large sugar producers on the world market price.

Reuters news agency yesterday said large U.S. food companies have been pushing the Obama administration to ease sugar import curbs, citing forecasts for unprecedented sugar shortages that could result in higher retail prices and possible job losses.

In a letter to U.S. Agriculture Secretary Tom Vilsack dated August 5, companies and groups that include Kraft Foods Inc, General Mills Inc and Hershey Co warn that “our nation will virtually run out of sugar,” if a U.S. Department of Agriculture forecast is accurate.

The letter was written a week before the Agriculture Department on Wednesday said the closely watched stocks-to-use ratio in the U.S. sugar market for 2009/10 stood at 6.7 percent, up from 3.4 percent in last month’s report.

The situation is seen easing because of increased beet sugar and cane sugar production, according to the USDA.

U.S. sugar industry officials say importing sugar into the United States would not be cost effective because there is now little difference between the world price and the price in the U.S. domestic market.

In any event, analysts say, rising sugar costs are unlikely to boost prices of food products because prices for other ingredients such as grains have declined since last year.

Still, the USDA prefers the stocks ratio at 15 percent and the government has used a figure below that level as a reason to order imports, as it did in August 2008.

The Sweetener Users Association, representing companies that use sugar, called yesterday for an increase in the U.S. sugar import quota of 450,000 short tons for this marketing year, which ends on September 30.

The association said the sugar supply will be unduly tight despite USDA’s forecast of slightly larger domestic output.

Food industry analysts say inflation should be contained for an industry that sharply increased prices in the past year as costs for commodities such as vegetable oil, wheat and corn surged.

Lee Linthicum, global food research manager at Euromonitor International, likened the food industry’s concern over sugar prices to warnings manufacturers raised when oil futures rose to about $140 a barrel last year.

“Nobody thought that oil would ever go below $100 a barrel ever again and now, look where we are,” he said.

Sugar prices have been at record highs as a weak monsoon season raises concern about production in India and Brazil.

India, the world’s largest sugar consumer, swung to a net importer this year from a net exporter last year after a poor domestic harvest, and a weak monsoon augurs for another disappointing crop in 2009/10.

Slow harvesting in Brazil after recent rainfall is also expected to damage yields and Brazilian mills are hard hit by the credit crunch, limiting their capacity to step up production to meet the resilient global demand, analysts say.