U.S. sugar industry says imports not cost effective

NEW YORK (Reuters) - 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, industry officials said Wednesday.

U.S. food companies are clamoring for more sugar imports, warning the country could "virtually run out of sugar" unless the Obama administration eased import curbs.

But the analysts said imports make little economic sense.

John Sheptor, president and chief executive of Imperial Sugar, told Reuters in a recent interview that freight costs would get in the way of importing sugar economically.

"Not only (do I) have to cover the price of the No. 11, but (I have to account for) the 2.0 to 3.0 cents premium for freight," he said. Imperial is the biggest sugar producer in the United States.

The price of world raw sugar is determined in the world No. 11 sugar market on ICE Futures U.S. while American domestic sugar prices are set by the ICE No. 16 domestic sugar market.

The No. 11 futures hit a 28-1/2 year peak at 23.33 U.S. cents per lb on Wednesday. Domestic No. 16 sugar saw its spot month end Wednesday at 26.95 cents, a differential of 3.0 to 4.0 cents that would be negated by shipping and storage.

In years past, the differential would range from anywhere from 8 to 10 cents. Prices in the world sugar market have exploded higher due to expectations of significant imports from No. 1 consumer India.

Jack Roney, director of economics and policy analysis at industry and producers' group American Sugar Alliance, said U.S. food companies would not benefit from the discount usually seen in No. 11 sugar prices because of its "convergence" with the No. 16 market.

The Sweetener Users Association, which groups American confectionary companies and bakeries among others, contends that industrial users use refined and not raw sugar. The price of refined sugar now stands at 35 cents, which they said is "far above historic norms."

"The risk of disruption from a hurricane or other adverse weather is worrisome to food and beverage manufacturers that rely on an assured supply of sugar," the Sweetener Users said.

Roney said the wholesale retail price of refined sugar in the United States in July stands at 35.40 cents, but points out that is below the 38 cents seen in August 2008.

Analysts do not expect U.S. tariffs on sugar to be lifted anytime soon so they believe that with the cost of shipping and freight included, the difference between the No. 11 and the No. 16 is practically negligible.

"It doesn't become all too economical to bring (sugar) in," said Jack Scoville, vice president and analyst for brokers The Price Futures Group.

And if there is a shortage, the U.S. Agriculture Department can order imports next year by increasing imports under the tariff rate quota (TRQ) sugar program. The USDA runs the program where over 20 countries export sugar to the U.S.

"There is absolutely no shortage of sugar here," said Roney, adding new-crop sugar supplies should start flooding the market when the cane and beet sugar harvest gets going in a few weeks. "We'll have plenty of sugar coming through."

The beet sugar harvest normally gets going at the start of October. The cane sugar harvest would normally start late in the summer or early fall.

For the latest U.S. sugar market supply/demand fundamentals for 2009/10, including beginning and ending stocks, beet and cane sugar production, please double click on:

(Editing by Lisa Shumaker)