Analysts Expect World Sugar Prices to Soar

Consumers face higher costs for candy, soft drinks and other sweet products this year, with tight supplies and speculative fervor poised to send sugar prices soaring on world markets, analysts say.

But they could collapse as fast as they rise, leaving the ultimate impact on consumer prices unclear.

“It will be a price spike, just like we have had in the past,” Margaret Blamberg, vice president for economic research at Amstar Sugar Corp., told an industry meeting this week.

“The speculators will run it up, and prices will go down just as fast,” she said. In 1974 and 1980, sugar prices rose several times and then plummeted, but not before costs of many sugar-containing products had increased.

World prices for raw sugar are projected to soar from current levels of about 14 cents a pound to 21.5 cents and then fall to about 10 cents a pound, according to the average estimates of a panel of four industry analysts.

Tight sugar supplies are expected to fuel the increase because world sugar consumption has outpaced production for the past four years and could do so again this year, said David Berg, economic research manager for American Crystal Sugar Co.

Stocks could fall to their lowest levels since 1980-1981, when world sugar prices topped 40 cents a pound, he said.

Speculative interest in sugar has also been rising steadily in recent years, fueled by an increase in commodity fund assets, he said. That could force prices higher than purely fundamental considerations would warrant.

“Emotion and greed will play a major role in market movements,” said Berg.

U.S. sugar prices already are higher than world prices--about 23 cents for a pound of raw sugar and 40 cents for refined sugar on grocery shelves--because of government price supports. But American sugar refiners could increase their own prices if world prices rise.

“If the world price became the dominant influence on domestic prices, we would follow that,” said James Burt, senior vice president for sales and marketing at California & Hawaii Sugar Co.

Whether makers of sugar-containing products use a sugar price hike as justification for raising their own prices may depend on how long the sugar price stays high and how consumers react, said Berg.

“That’s where it gets to be politically difficult,” he said.