Imperial Says U.S. May Raise Sugar-Import Quota to Aid Supply

The U.S. may raise its raw-sugar import quota for the second time this year to ease the tight supplies for domestic food companies, said an executive at Imperial Sugar Co., the second-largest U.S. cane refiner.

“In the last couple of weeks, we have seen the necessity to buy world sugar and pay the high-tier tariff in order to secure supplies for refining in the U.S.,” Patrick Henneberry, a senior vice president for commodities management, said yesterday by telephone from Sugar Land, Texas.

On April 23, the U.S. Department of Agriculture boosted this year’s import quota by 16 percent to 1.3 million metric tons after retail prices surged to a record high. The increase in imports under the low-tariff quota was about one-fifth of the amount that sugar users and refiners had called for.

A second quota increase for the year ending Sept. 30 is “possible,” said Henneberry, 56, who headed Louis Dreyfus’s sugar trading and distribution in the Western Hemisphere before joining Imperial in 2002. The government “will take whatever action necessary to ensure we have enough sugar,” he said. Henneberry declined to speculate on the size of an increase.

Since April 23 through yesterday, the premium for U.S. raw sugar over global prices surged 20 percent to 17.12 cents a pound, touching 18.51 cents on May 28, the highest level in at least 25 years. A “normal” spread would be 8 cents to 10 cents, Imperial Chief Executive Officer John Sheptor said on March 5.

Import Quotas

The USDA is “continuing to monitor the situation,” said Caleb Weaver, a department spokesman. He declined further comment.

Sugar is the only major agricultural commodity produced in the U.S. that is subject to import quotas. The limits were established to benefit domestic growers of sugar beets and cane. In 2008, Mexico became exempt under the North American Free Trade Agreement.

On ICE Futures U.S. in New York, the price of U.S. raw- sugar contract, used mainly by domestic refiners and industrial consumers to hedge supply risks, has dropped 7.2 percent this year, compared with a 43 percent slump in the global price. The world price has declined from a 29-year high of 30.4 cents on Feb. 1 partly because of forecasts for higher output in Brazil and India, the largest producers.

“I don’t think we’ll be done with the physical tightness until we get into the south Brazil crop in 2011, so we have another year of a relatively tight sugar situation,” said Henneberry, who has been in the sugar industry for 31 years. “The price declines are clearly preceding reality by a year or more.”

Volatile Outlook

Sugar prices “will be quite volatile over the next 12 to 18 months,” Henneberry said, adding that he wouldn’t be surprised to see prices rally to 20 cents or slip below 13 cents, a 13-month low reached on May 7.

Raw-sugar for October delivery, reflecting the world price, gained 0.29 cent, or 1.9 percent, to 15.38 cents a pound yesterday on ICE in New York. Domestic-sugar futures for September delivery rose 0.62 cent, or 1.9 percent, to 32.5 cents a pound.

Domino Foods Inc., based in Iselin, New Jersey, is the largest U.S. sugar processor.

With assistance from Alan Bjerga in Washington. Editors: Steve Stroth, Daniel Enoch.

source: businessweek