THE SUGAR INDUSTRY'S STRUCTURE, PRICING AND PERFORMANCE

U.S. DEPARTMENT OF AGRICULTURE / ECONOMIC RESEARCH SERVICE / AGRICULTURAL ECONOMIC REPORT NO. 364

THE SUGAR INDUSTRY'S STRUCTURE, PRICING AND PERFORMANCE^ by Robert Bohall and others, Coiiiinodity Economics Division, Economic Research Service, U.S. Department of Agriculture. Agricultural Economic Report No, 364»

ABSTRACT

The structure, pricing, and performance of the U.S. sugar industry were studied with special emphasis on the industry's performance during the recent years of economic stress. The major causes of high U.S.* sugar prices in 1974 were tight world sugar supplies and high world sugar prices. In 1974, as in most years, the United States imported about half its sugar. Above the supportive limits of the U.S. Sugar Act, world and U.S. price changes were closely correlated either when rising or declining. So, supply changes in the world sugar market had a major impact on the U.S. sugar industry and on U.S. consumers. In addition to outlining some of the major causes for high sugar prices in 1974, the study focused on the structure of the sugar industry, price movements, price analysis, performance of the industry, and outlook for the future. The beet processing and cane refining industry was found to be one of the more concentrated U.S. industries. And although concentration provides economies of size and improved industry performance, firms could maximize their returns by differentiating between markets, which would be consistent with discriminatory pricing practices. The basing point system of sugar pricing was also discussed—certain firms tended to be price leaders and others followers.

Keywords: Agricultural policies, agricultural trade, beet sugar, consumer demand, consumption, market performance, marketing cooperatives s sugar cane, sweeteners, world trade.

Washington, D.C. 20250 , March 1977

PREFACE

This report summarizes a study conducted by an ad hoc task force of the Economic Research Service (ERS) and Farmer Cooperative Service (FCS), U.S. Department of Agriculture (USDA). The study covers the sugar industry's structure and pricing performance with special reference to the past 2 years. It was specifically requested by Don Paarlberg, Director of Agricultural Economics, USDA, on March 19, 1975.

The task force was coordinated by Robert Bo^all, Commodity Economics Division (CED) of ERS. Other task force members and their affiliations were Fred Hülse and Charley Powe, FCS; Luigi Angelo, Fred Gray, and Larry Larkin, CED-ERS. The task force appreciated the'ideas and suggestions of Tom Little, CED-ERS, during the final preparation of the report.

This report, originally titled "Staff Report on Sugar Industry Structure and Pricing," was the basis for an interdepartmental revision in July 1975 and was made available to members of the House Committee on Agriculture during hearings on sugar July 14, 15, 17, 18, and 22, 1975. Use of brand names or company names in this publication is for identification only and does not imply endorsement by the U.S. Department of Agriculture.

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CONTENTS

Page

CONCLUSIONS V •. iv

INTRODUCTION • 1

STRUCTURE OF THE SUGAR INDUSTRY 1 The U.S. sugar industry and the sweetener industry •.•.........*....•.. ^ Sources of sugar supplies 3 Production and processing segments ••...•..•..••...••.. ................ 8 U.S. cane refineries and beet processors ............*........ 8 Raw cane sugar mills .•.•....•....••..••....•... 10 Growers 14 Sugar distribution; areas served by processors and refiners .......... 18 Sugar utilization 22 Impact of sugar legislation on industry structure ..................... 27

PRICE MOVEMENTS .. - 33 Comparing U.S. and world prices 33 New York and world spot prices •.•..••..•• • 37 Basing point pricing 38 Wholesale prices 39 Retail prices > 46

PRICE ANALYSIS ............ 49 The world production-consumption balance 49 Supply factors ........*............•..• ^^ Demand factors 59 Overview 68

PERFORMANCE OF THE SUGAR INDUSTRY 69 Prices and marketing spreads (margins) 69 Costs of production and processing 72 Performance of individual companies ^^ Price leadership 75

THE FUTURE 77 Conditions since the 1974 price rise 77 Outlook 78

APPENDIX A—TABLES. •- • • • 82

APPENDIX B~PRICING 1974 SUGARCANE AND SUGAR BEET CROPS • 112

Lii

CQNGHPSIONS

This study reports the findings of a task force of the U.S. Department of Agriculture (USDA) which examined the structure and price performance of the U.S. sugar industry. Special emphasis was cetitered on the industry's performance during the recent years of considerable economic stress.

The study undertaken by the task force led to these conclusions:

(1) The major causes of high sugar prices in the United States in 1974 were tight world sugar supplies and high world sugarr prices. In 1974, as in most years, the United States imported about half of its sugar. Above the supportive limits of the U.S. Sugar Act, world and U.S. price changes were closely correlated either when rising or declining. So, changes in the world sugar market had a major impact on the U.S. sugar industry and on U.S. consumers.

(2) World sugar prices move cyclically. Peaks JOí such cycles, recorded in 1957, 1963, and 1974, indicate that the amplitude of price movements has been increasing over time—record prices were reached in 1974. Each cycle is characterized by reduced production relative to d^nand and by a drawdown of world stocks over 2 or 3 years. Because of the inelastic nature of demand for sweeteners, such a stock depletion eventually causes sugar prices to increase sharply, while the supply response, particularly for cane sugar, is delayed because of the fixed nature of production and processing investments.

(3) The 1974 supply-demand imbalance was compounded by low-price policies of many countries. These policies encouraged domestic consumption and discouraged investment in sugar production and processing facilities.

(4) The world sugar market before 1975 normally represented only 12 to 15 percent of annual world production, or 10 to 11 million short tons. Many events tended to exert considerable additional pressure on the world sugar market in 1974:

(a) Unfavorable weather reduced production in Russia, Poland, Western Europe, the Philippines, and to a lesser extent production in the U.S. beet areas.

(b) High prices of competing crops, especially grains, lowered beet plantings in the United States. This effect was reinforced because of the delayed impact of Cost of Living Council régulâttons that froze sugar prices. Consequently, this curtailed increases in net returns from sugar beets and reduced beet acreage in 1974.

(c) Emerging and newly rich nations, such as the Middle East countries, increased their consumption of sugar.

(d) Some industrial users and consumers in the United States hoarded sugar in view of steadily increasing prices in the second and third quarters of 1974.

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(e) Certain exporting nations withheld some supplies to speculate on even higher sugar prices,

(f) Administrative decisions were made to increase U.S. sugar requirements above consumption needs. Similar action during a somewhat comparable situation of tight supplies in 1963-64 reduced U.S. sugar prices as sugar Imports increased. In 1974 a different effect was realized. Added shortrun pressure was placed on very tight supplies when the U.S. sugar requirements were increased. The effect was mainly psychological and short run, since consumption fell short of announced requirements.

(g) The defeat of the bill to extend the U.S. Sugar Act on June 7, 1974, resulted in the quota discount becoming much lower.

(h) Producers, having sold distant futures contracts, were occasionally not able to cover their position in a fast-moving situation in the fall of 1974, So, they were forced to hold onto immediately available supplies while the market was rising by the daily limit each trading day.

(5) The entire structure of sugar prices in the United States is closely interrelated. The price most commonly referred to is the domestic daily spot price, currently No, 12 contract, of the New York Coffee and Sugar Exchange. The quotation or spot is determined each trading day by a spot committee of five members of the exchange who are in the domestic raw sugar market business. The committee considers all information related to sales, bids, and offers in determining the proper spot quotation for a particular day. In the absence of any sales, bids, or offers, the committee is authorized to make the spot price on the basis of the tone of the market. The exchange establishes the spot price solely for the purpose of determining the value of raw sugar in the event of a contract default.

The New York spot price is the primary basis on which raw cane sugar mills pay independent growers for domestic cane, and it is closely tied to the world price of raw sugar. As a result, the entire structure of pricing refined cane sugar in the Northeast, Southeast, Gulf, Southwest, and Chicago-West territories is closely tied to the New York spot prices. Because of the keen competition in the refined sugar industry, the spot price indirectly influences western beet and cane prices. Accordingly, the entire pricing structure of the domestic sugar industry is directly or indirectly influenced by the price of raw sugar.

(6) Competitive pressures in the sugar industry most often appear between—

(a) Beet and Hawaiian cane sugar in the West.

(b) Beet and cane sugar in Chicago-West.

(c) Sugar and corn sweeteners throughout the United States,

In 1975 competitive pressures from beet sugar forced down the price of refined cane sugar. Based on list prices, a gap of about 6 cents evolved between western and eastern sugar prices. Eastern prices are locked into the New York spot and hence the world price of sugar. Beet sugar is only indirectly influenced. So, western sugar marketers can compete by lowering prices and expanding market shares if they desire. One of the factors in the price turnaround of November 1974 was the willingness of beet processors to cut prices.

(7) USDA margins data indicate that the cane and beet producers, raw cane mills, and beet processors benefited greatly from the high sugar prices of 1974 and 1975. Raw cane mills and beet processors benefited because the contracts with growers allowed joint sharing of returns. Growers benefited in the same manner as with any agricultural commodity under conditions of variable supplies. In a period of short supplies, prices rise and returns may exceed production costs by a wide margin.

(8) Historicallys rates of return for cane refiners have been modest compared with most other industries. Although margins increased slightly in 1974 and some firms had higher profits, cane refiners did not benefit greatly from the high prices of 1974 and 1975. Benefits that may have occurred through inventory positions may have been partly eliminated by falling prices since November 1974, although refiners' margins were high in 1975 relative to those in 1973 and 1974.

(9) Retailers and distributors realized lower margins and in some cases losses in an effort to hold down sugar prices in 1974.

(10) Cane producers and raw cane mills have close ties. More than half of the Florida and Louisiana production and nearly all of the Hawaiian production are administration cane which is produced on farms operated by the sugar mills. But given the number of sugar companies, raw cane mills seem quite competitive. Cooperatives are becoming increasingly important in the industry. Except for Hawaiian cane, an integrated cooperative mill-refinery in Florida, and three processor-refiner operatians In Louisiana, there seems to be no close ownership ties between cane refineries and raw cane mills. Sugar beets are produced by many growers. With one reception, there are no known ownership ties between beet processprs and cane refiners.

(11) A total of 18 firms marketed 97 percent of the refined sugar in 1975, making the beet processing and cane refining industry one of the more concentrated U.S. industries.

(12) Although the concentration of sugar refining and processing has resulted in economies of size and in reasonable economic performance, two elements of U.S. sugar pricing open the indias try to criticism. First, the basing point system of sugar pricing may be subject to question, and recent lawsuits indicate the industry may be in difficulty here. Second, based on transportation costs, prices appear to be higher in the Northeast and Intermonntain Northwest and lower in Chicago-West than might be warranted. Given the nature of a more elastic demand in Chicago-West because of a large concentration of major industrial users, such market behavior would be

VI

consistent with discriminatory pricing in which a firm can maximize returns by differentiating between markets.

(13) Analysis of price announcements by major beet sugar processors and cane sugar refiners during periods of price increases indicates that, depending on the basing point, certain firms tend to be price leaders and others price followers. In periods of falling prices, price changes are frequently announced jointly on the same day by two or more firms. In effect, on the upside a dominant firm may make the first announcement based on competitive conditions. On the downside, firms are quick to react t^ price announcements; several firms may announce identical price declines on the same day.

(14) Finally, the U.S. sugar industry has performed reasonably well but has some problems during periods of severe stress in the world sugar market. The major reason for I974's high sugar prices in the world, including the United States, was very tight world supplies. The United States imports about a fifth of all sugar exported in the world, so world prices are inexorably linked to U.S. prices.

With the demise of the U.S. Sugar Act on Deconber 31, 1974, the various constraints imposed under this Act were eliminated, along with the benefits to the U.S. sugar industry. This raises many questions about the sugar industry in the future. Will the basing point pricing system be continued? Will provisions of contracts be altered between raw mills and cane producers and between beet sugar processors and growers? Will the bulk of our sugar imports continue to be in raw form? Where will cane sugar refineries locate in the future? To what extent will the participating contract between raw sugar suppliers and refiners be used in the future? Will the 1974 price situation be repeated? Many other questions of a similar nature can be raised.

To provide data to analyze these types of queô^:ions and to maintain a good base of economic information on the sugar industry, several recommendations are pertinent to the programs of the Economic Research Service (ERS), Farmer Cooperative Service, and other USDA agencies.

(1) Under the Sugar Act, a wealth of data on the industry was available. Most of these data series have been continued and §re being aiialyzed to serve the industry as part of the Department's economic intelligence function. Many ways have been used to make information publicly available, including "Sugar Reports" of the Agricultural Stabilization and Conservation Service (ASCS); "Sugar Circulars" of the Foreign Agricultural Service; "Sweetener Outlook and Situation" of the Economic Research Service which was published in the "National Food Situation;" and other reports. With the transfer of functions from ASCS to other agencies, including Statistical Reporting Service (SRS), Agricultural Marketing Service (AMS), and ERS, the Department combined many of these reports and now issues a monthly "Sugar and Sweetener Report," published jointly by AMS, ERS, and FAS. In effect, the "Sugar and Sweetener Report" has become the Department's major source of sweetener information for the domestic industry, U.S. policymakers, and the public. Contents include sweetener statistics, the world and domestic outlook and situation, and short articles presenting results of special research studies and analyses.

vii

(2) Economic intelligence on the foreign sector for sweeteners needs to be continually improved. A strong effort is needed to improve the timeliness, reliability, and completeness of data on production, stocks, consumption, prices, prospects, planned expansion, and Gompetitive positions of foreign suppliers. A systematic analysis and 5-year projections of world and domestic demand relationships and of supply responses should be made annually and released to the public. This will help anticipate the buildup of economic pressures, such as in 1974.

(3) The Department should continue to strengthen its economic research and data collection with respect to prices, margins, costs, and returns at the production, processing, refining, and retailing levels of the sugar industry. This should include studying the economies of size in the production and processing sectors and working with refiners to obtain average industry costs and returns. Particular emphasis should also be given to comparative costs for competitive production areas, both foreign and domestic, and for competitive products entering the sweetener market. This wpuld help U.S. producers in considering alternative crops and investment opportunities.

viii

THE SUGAR INDUSTRY'S STRUCTURE, PRICING AND PERFORMANCE

By

Robert Bohall, Luigi Angelo, Fred Gray, Fred Hülse, Lawrence Larkin, and Charles Powe

INTRODUCTION

U.S« sugar prices during the past 25 years have behaved similarly to a sleeping giant, resting peacefully for the most part. One restless period was early in the sixties. A gradual awakening beginning in 1971 resulted in a violent upturn and a fivefold price increase in 1974. This increase was followed by an equally rapid decline from mid-November 1974 to the present period (June 1976). Because of the dramatic events which unfolded in 1974, coupled with the expiration of the U.S. Sugar Act, many important questions have been raised about sugar prices, structure of the sugar industry, and performance of the Industry during this period of stress. This report attempts to put some of these concerns in perspective to consider the impact of longrun and shortrun economic forces on the foreign and domestic sectors of the sugar industry.

STRUCTURE OF THE SUGAR INDUSTRY

The U.S. Sugar Industry and the Sweetener Industry

The sweetener market consists of caloric and noncaloric sweeteners. Caloric sweeteners include beet sugar, cane sugar, corn sirup, dextrose, new high-fructose corn sirup, honey, edible molasses, maple sirup, sugarcane sirup, and sorghum sirup. The noncaloric sweeteners consist of saccharin, cyclamate, and aspartame.

Total U.S. consumption of caloric sweeteners in 1974 was 13 million tons (dry) weight basis) or 123 pounds per capita (table 1). In 1975, total consumption fell to 12.5 million tons or 117 pounds per capita. Of the 1975

Tatle 1—Caloric and noncaloric sweeteners: Domestic use, market share, and per capita consumption, 1974 and 1975

mer

[ Domestic disappearance ] Per capita consunrption

Type of sweet« ; 197»^: 1975 : 197h : 1975 ; 197^ : I975I/

1^000 tons Percent Pounds

Sugar Beet Cane

! 2,771 : 7,509

3,089 6.387

21.3 2Í+.7 57.8 51.0

26.2 70.8

28.9 59.8

Total il0,280 9,h76 79.1 75.7 97.0 88.7

Other sweeteners 2/ Corn sirup Dextrose

Î 2,085 ; 498

2,to3 1+81

16.1 19.2 3.8 3.9

19.7 h.7

22.5 Í+.5

Total i 2,583 2,88U 19.9 23.1 2k.k 27.0

Other minor caloric sw€ seteners

lers

i 13^^ 13i* 1.0 1.2 1.2 1.U

Total caloric sweeter !12,997 12ik9k 100.0 100.0 122.6 117.1

Noncaloric (saccharin) sweeteners 3/; : 7^ 6kl .ii/5.7 V5.1 7.0 6.0

1/ Preliminary. 2/ Dry basis. J/ A sugar sweetness equivalent assumes that saccharin is 30O times as sweet

as sugar, j^/ As a percentage of total caloric sweeteners*

total consumption, 25 percent waô beet sugar; 51 percent, cane sugar; 23 percent, corn sweeteners; and 1 percent, minor sweeteners. Over time, some shifts have occurred in sources of sweeteners. Sugar is the major sweetener. Its share of total disappearance declined from 88 percent in 1960 to 76 percent in 1975. Total refined sugar consumption of 9.5 million tons in 1975 was only 7 percent larger than in 1960 (app. tables 1, 2, and 3). U.S. beet sugar*s share of the caloric sweetener market varied from 21 to 26 percent during 1960-75. Refined cane sugar's share declined from 65 percent in 1960 to 51 percent in 1975. U.S. corn sweetener consumption increased from 1 million tons in 1960 to 2.9 million tons in 1975. Most of the inerease came from the nearly threefold rise since 1960 in corn sirup consumption to 2.4 million tons in 1975. High-fructose corn sirup is expected to absorb much of the growth in future sweetener consumption. Dextrose consumption of 481,000 tons in 1975 was up 57 percent from 1960.

Consumption of minor caloric sweeteners decreased slightly between 1960 and 1975. Honey, the primary minor caloric sweetener, currently makes up 1 percent of total caloric sweetener consumption. Other edible sirups Include several natural sweeteners which are largely desired for their flavor with sweetness being an incidental characteristic. Their total consumption is now less than 0.5 percent.

Noncaloric sweetener consumption tripled from 1960 to 1975, despite the banning of the use of cyclamates for food use in 1970. In 1975, noncaloric sweetener consumption on a sweetness equivalent basis equaled only 6 percent of caloric sweete<ner use. Because noncaloric sweeteners are used mainly by people for dieting and so forth, reduced noncaloric consumption would probably not increase caloric consumption by very much.

Sources of Sugar Supplies

Under provisions set forth in the expired Sugar Act, a determination of the quantity of sugar needed by consumers in the continental United States was made each year. This determination was announced during October for sugar needed the following year, and upward or downward adjustments were made when needed to achieve the price objective set forth in the Act. This action limited the amount of foreign sugar that could be imported and the amount of domestic sugar that could be marketed in the United States during the year.

Under the expired Act, the domestic areas, in total, had the ri^ht to supply approximately 62 percent of the sugar requirements of the continental United States. Principally because of the decline of Puerto Rican cane output and the failure of the domestic beet industry to use all of their quotas, the domestic industry actually supplied about 49 percent or 5.4 million tons in 1974 (table 2), It should be noted that under the expired Act, shortfalls of production in Puerto Rico and elsewhere were reallocated exclusively to foreign countries. During 1960-75, imports made up as much as 52 percent of our sugar requirements in 1960 and as little as 39 percent in 1964 and 1965. The United States has always been highly dependent on foreign sugar to supplement domestic production. In 1975, however, the United States imported only 3.9 million tons or 40 percent of our needs. The 3.9 million tons represented the lowest level of imports since 1964 when imports totaled 3.6 million tons.

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Table 2--Sugar quota marketings

Year Total U.S. '

sugar marketings

Sugar suppl: Led by-- , Percentage share of U.S. ; marketings supplied by

• Domestic : : sources :

Foreign imports

: domestic sources

• 1,000 short tons. raw value J./ Percent

1960 9,526 4,532 4,994 48 1961 9,732 5,432 4,300 56 1962 9,797 5,201 4,596 53 1963 10,515 5,960 4,555 57 1964 9,109 5,524 3,585 61 1965 9,920 6,095 3,825 61 1966 10,355 6,040 4,315 58 1967 10,384 5,951 4,433 57 1968 10,951 5,985 4,966 55 1969 10,735 5,886 4,849 55 1970 : 11,552 6,374 5,178 55 1971 11,294 5,923 5,371 52 1972 : 11,840 6,402 5,438 34 1973 11,676 6,344 5,332 54 1974 11,191 5,447 5,744 49 1975 2/ 9,633 5,759 3,874 60

1/ Raw value is the term used in the Sugar Act for expressing in a common unit various types of raw and refined sugars that move in conftnerce. One ton of refined sugar equals 1.07 tons of sugar, raw value.

2/ No quotas were in effect in 1975.

Source: Sugar Reports, ASCS; Sugar Market News. ÂMS

The 3 shows the participation of the various domestic and foreign areas supplying sugar to the U.S. market from 1960 through 1975. In 1975 as in most recent years, more than half of the domestic marketings came from sugar beets. Mainland cane and Hawaiian cane were the two other major sources. Puerto Rican cane production declined rapidly late in the sixties, and in 1975 Puerto Rico supplied only 96,000 tons or 2 percent of the total domestic marketings. Domestic beets uspplied 3,283,000 tons or 34 percent of the 1975 marketings of 9,633,000 tons from both domestic and foreign sources (app. table 4). On a similar basis. Mainland cane provided 15 percent and Hawaiian cane 10 percent.

During 1975, sugar was imported from 32 foreing countries of which 19 were in the Western Hemisphere and 13 were in the Eastern Hemisphere. The largest quantities imported in 1975 were from the Dominican Republic, followed in order by Australia, British West Indies, Peru, Brazil, and India (app. table 5). On a regional basis, the Eastern Hemisphere countries were the most important source of foreign sugar imports in 1975, followed by the Caribbean Islands, South America, Mexico, Central America, and the Republic of the Philippines.

Table 3~Sugar quota marketings

Dornesti c areas : Republic

Year ¡Domestic :Mainland : Hawaii:] Puerto: Virgin: Total : of the : beet : cane 1/ Rico : Islands: domestic :Philippines

1,000 short tons, raw value 1960 . 2,165 619 845 896 7 4,532 1,155 1961 : 2,607 784 1,045 980 16 5,432 1,355 1962 : 2,415 787 1,084 904 11 5,201 1,256 1963 : 2,965 1,072 1,033 875 15 5,960 1,195 1964 : 2,699 906 1,110 793 16 5.524 1,217 1965 : 3,025 1,099 1,137 830 4 6,095 1,178 1966 • 3,025 1,100 1,200 711 5 6,040 1,186 1967 : 2,824 1,169 1,253 705 —- - 5,951 1,123 1968 : 3,085 1,204 1,192 504 _.— 5,985 1,124 1969 ' 3,216 1,169 1,160 341 —._ 5,886 1,124 1970 : 3,569 1,308 1,145 352 —-:■ 6,374 1,298 1971 : 3,438 1,255 1,087 143 _-_ 5,923 1,592 1972 : 3,511 1,630 1,113 146 . ; 6,402 1,432 1973 ■ 3,512 1,614 1,142 76 _ : 6,344 1,454 1974 : 3,024 1,273 993 157 : 5,447 1,472 1975 _3/ : 3,283 1,425 955 96 -— ^ 5,759 413

1973: 1st quarter ¡ ; 734 250 178 17 • 1,179 282 2nd quarter : 961 240 380 16 1,597 593 3rd quarter 1,046 310 301 32 1,689 497 4th quarter , : 771 813 283 11 --'- ; 1,878 82 Total : 3,512 1,613 1,142 76 -—■ 6,343 1,454

1974: 1st quarter 694 220 94 23 —- ' 1,031 365 2nd quarter 704 243 174 64 — ; 1,185 540 3rd quarter 942 175 442 55 —- -. 1,614 393 4th quarter : 684 635 283 15 —-- ; 1,617 174 Total ■ 3,024 1,273 993 157

— ■. 5,447 1,472

1975: 3/ i 1st quarter ; 517 225 74 4/ i__ 816 139 2nd quarter : 886 357 327 21 —~ : 1,591 30 3rd quarter : 1,143 238 320 49 —- 1,750 197 4th quarter : 737 605 234 26 —- 1,602 47

Total : 3,283 1,425 955 96 5,759 413

1976: 3/ ! 1st quarter : 913 477 169 46 1,605 58

¿/Includes Texas cane area beginning in 1973* _^/^^ Gountries which did not small quantities used for reexportation, alcohol, and livestock feed which data quarterly data include sugar authorized for entry which may be received in the Source: Sugar Report, ASCS; Sugar Market News, ÁMS; arid Sugar and Sweetener

in the continental United States

Foreign areas

Caribbean Mexico and Central America

South America

Eastern Hemisphere

Other 2/

Total foreign

Total marketings

2,970 719

1,121 866 590 692 862 888

1,019 1,019 995 961 937 797

1,114 1,023

194 235 255 197 881

341 568 149 56 1,114

237 365 341 80 1,023

118

469 762 527 540 654 652 709 778 925 979 973 932

1,061 1,034

953 471

268 383 282 101

1,034

328 358 177 90

953

90 249 119 13

1,000 short tons, raw value

471

250

375 10 1,017 430 1,064 547 1,225 692

520 603 727 567

1,067 491 1,145 499 1,383 515 1,220 507 1,371 541 1,348 538 1,420 588 1,366 681 1,543 662 . 742 1,151

384 141 156 93 127 208 699 239

1,366 681

379 38 112 110 410 272 642 242

1,543 662

53 65 77 249

353 390 259 447 742

235

1,151

208

15 4,994 9,526 17 4,300 9,732 81 4,596 9,797 37 4,555 10,515 1 3,585 9,109 9 3,825 9,920 4,315 10,355 4,433 10,384 4,966 10,951 4,849 10,735

5,178 11,552 5,371 11,294 5,438 11,840 5,332 11,676 5,744 11,191 74 3,874 9,633

1,269 2,448 1,460 3,057 1,369 3,058 1,318 3,196 ~~— 5,416 11,759

—.— 1,451 2,482 1,688 2,873 1,401 3,015 1,204 2,821 —-«— 5,74Â 11,191

5 589 1,405 10 980 2,571 27 1,427 3,177 32 878 2,480 74 3,874 9,633

15 884 2,489

have quotas after 1965. 3/ All data for 1975 and 1976 are preliminary. Includes before 1975 do not include. Also, 1975 data represent actual receipts, but prior next quarter. No quotas were in effect beginning in 1975. kj Less than 500 tons. Rep o rt, AMS and ERS.

Production and Processing Segments

Production and processing in the U.S. sugar industry are divided into several distinct segments. Sugarcane is grown and raw cane sugar is processed in Hawaii, Louisiana, Florida, Texas, and Puerto Rico. In addition to purchasing sugarcane from independent growers, many raw sugar companies grow part and in some cases all of the sugarcane they process. These are commonly referred to as producer-processors. Raw sugar companies generally sell their raw sugar to cane sugar refineries; however, a few have their own refining facilities.

Cane sugar refineries in the United States found it economical to locate their production facilities at ports of entry or adjacent to densely populated areas. This gave them easy access to offshore raw cane sugar. The larger refineries are located in the areas of Boston, New York, Philadelphia, Baltimore, Savannah, New Orleans, Houston, and San Francisco (fig. 1). In addition, three smaller inland refineries are in Louisiana and three in Florida. Liquid sugar refineries are in Chicago, St. Louis, New York, and Belle Glade, Florida.

Sugar beets move directly from fields to factories where they are processed into refined sugar. Beet factories are in areas where sugar beets are produced. Unlike cane sugar, sugar beets are processed into refined beet sugar in one operation. So, the marketing channel is less complex.

Major States that produce sugar beets include California, Colorado, Idaho, Michigan, Minnesota, North Dakota, Nebraska, and Washington. Nine other States also produced beets in 1974.

U.S. Cane Refineries and Beet Processors

In 1975, 18 major companies refined cane and processed beet sugar. They accounted for 97 percent of the cane and beet sugar distributed for U.S. consumption, making sugar one of the more concentrated agricultural industries (table 4).

Table 4-- Rankings of cane refiners and beet sugar processors by percentage of sugar distribution for U.S. consumption

Company rankings according to 1975 share of U.S. market ' 1960 ; 1965 ! 1970 ; 1974 : 1975

Percent

Top 4 ; 52.5 48.1 43.6 48.9 48.0 Top 5 to 10 21.1 24.9 26.5 25.7 28.0 Top 10 73.6 73.0 70.1 74.6 76.0 Top 11 to 18 15.1 20.2 21.8 18.3 21.4 Top 18 88.7 93,3 91.9 92.9 97.4 All other 11.3 6.8 8.1 7.1 2.6

Source: ASCS, Sugar Div.

LOCALITIES OF SUGAR CROP PRODUCTION, SUGAR BEET FACTORIES, SUGARCANE MILLS AND REFINERIES

CROC,

SUGAR BEET FACTORY

SUGARCANE MILL

SUGAR BEET PRODUCING AREAS

SUGARCANE PRODUCING AREAS

FLORIDA - 8 RAW MILLS AND 3 REFINERIES

Figure 1

The top four companies accounted for 52.5 percent of total sugar distributed in the united States in 1960, but their share dropped to 48 percent in 1975. A 17 week strike which affected refinery operations at one of the top four may have been responsible for the smaller 44 percent share these companies distributed in 1970.

The top 10 companies accounted for 76 percent of total U.S. sugar distribution in 1975, 2.4 percent more than in 19^^60. Of the top 10 firms, one processed sugar beets and also refined raw sugar, 7 were cane refiners, and 2 were beet processors. Eighteen companies (19 in 1965) distributed 89 to 97 percent of the sugar consumed in the United States in 1960, 1965, 1970, 1974, and 1975.

Shares of the market held by individual companies show only limited variation. With relatively little shifting, 11 companies made up the top 10 over 5 selected years. One company ranked tenth in 1960 became seventh in 1975, and the company ranked second in 1960 became eighth in 1975.

There were 62 factories slicing sugar beets in 1960 and 1965, 58 in 1970, 55 in 1974, and 56 in 1975. During these same years, the number of cane refineries decreased by only 1, and at the end of 1975 they totaled 23.

Beet processors and cane refiners generally are specialized firms with sweeteners as their main business. However, some companies have other food and nonfood enterprises.

Raw Cane Sugar Mills

Raw cane sugar mills crush cane to produce the raw sugar. Refiners then further process the raw sugar into the more familiar white crystalline sugar.

This two-stage sugar production process for cane sugar (cane to raw sugar and raw sugar to refined) probably originated in the economics of processing raw sugar in relatively small cane-producing areas and then refining the raw sugar on a large-scale basis, usually near major markets. Much of this raw sugar was imported from tropical, underdeveloped countries that lacked resources for refinery construction. However, both processing and refining are sometimes performed at single locations wher^ the raw mill and refinery are adjacent and operated under one ownership. Marketings from Florida, Louisiana and Texas mills ara increasing. Hawaii tends to hold relatively steady, and Puerto Rico exhibits decreases (table 5).

Raw sugar mills Vary in capacity and in volume marketed both within and between production areas. For instance, average quota marketings ranged from 9,000 to 113,000 tons in 1975. Data on indlviduai mills would show a similiar pattern since most companies have only a single mill (table 6).

Some sugar companies operate more than one raw mill. In Lousiana, the South Coast Corporation and Southdown, liic, operate three raw mills each. In Florida, the United States Sugar Corporation operates two mills. One company in Hawaii operates two mills while another company operates three mills.

10

Table 5—^^Quota marketings of raw sugar by areas

Area ' 1960 ' 1965 ' 1970 * 1974 ' 1975 1/

1,000 tons, raw value

Florida Louisiana Texas Ij Hawaii Zj Puerto Rieo

177 546 640 664 792 442 553 668 556 552 ,—^ _.— 53 81 936 1,218 1,145 993 954 ,028 899 352 157 96

_1/ Preliminary. No (juotas In effect in 1975* Ij Texas began opérations in 1973. 3/ Data for Puerto Rico and Hawaii include sugar for local consumption*

Cooperatives are becoming more prominent in the milling of sugarcane and are accounting for an increasing share of the total production (app.. table 7) .

In 1960, there were 10 cooperative raw mills in the domestic sugar industry. All of these mills were located in Louisiana. Since 1960, four cooperative mills have been added in Louisiana, three have been organized in Florida, and one began operation in Texas. None of the Puerto Rican mills are cooperatively owned. For these areas in 1975, cooperatives constituted 29 percent of all mills and produced 26 percent of all raw sugar. This compares with 13 percent of all the mills and 8 percent of the production in 1960. Cooperative raw sugar production increased from 121,000 tons in 1960 to 724,000 tons in 1975 or fivefold. Possible reasons for the substantial increase are the producers' desire to be assured a marketing outlet for cane and the lack of adequate economic returns to attract private capital.

Just as cooperative mills are owned by sugarcane producers, some corporate mills have ties to other businesses. The extent of these relationships is not always apparent, but some relationships can be listed without an in-depth study of corporate and financial records.

For instance, all of the raw sugar mills in Hawaii are represented by agencies or parent firms which hold controlling interest in the sugar companies. These agencies or parent firms comprise mainly the "Hawaiian Big Five," a group of corporations with major trading interests in many agricultural and other commercial operations in Hawaii and other parts of the world. They provide many financial, accounting, buying, shippings and other services to the sugar companies (table 7).

The leading "agencies" had a large measure of influence, if not control, over nearly all of Hawaii's 19 75 raw sugar production. The Hawaiian su^ar industry is highly integrated (vertically) . All the plantations e^icept one both grow and process sugarcane. The 16 sugar companies cooperatively own the California and Hawaiian Sugar Company wh^ich refines and markets sugar.

11

Table 6—Average quota marketings of raw sugar companies by areas

K)

; 1960 \ 1965 ; 1970 : 1974 1975 U

Area : Number : : of : : companies :

Average: volume

per company,

: Number : : of : : companies :

Average volume

per company

: Number : : of : : companies: 1 • •

Average volume .

per company

Number : : of : : companies :

Average volume

per company;

• : Average

Numb er : vo lume of : per

companies: company • • •

Short tons

Short tons

Short tons

Short tons

Short tons

Florida 2 88,500 8 68,250 7 91,400 7 94,900 7 113,100

Louisiana 40 11,050 41 13,500 37 18,100 32 17,400 32 17,250

Texas 21 — — ' — „ — — 1 53,000 1 81,000

Hawaii 27 34,700 25 45,500 23 49,800 16 62,100 15 63,600

Puerto Rico 21 49,000 18 46,100 14 25,100 11 14,300 11 8,700

Vl No quotas were in effect for 1975. ij Texas began operations in 1973.

Table 7—Agencies owning Hawaiian sugar companies

Agency or parent firm Associated

sugar companies

1975 Hawaiian sugar

production

Alexander and Baldwin, Inc. Amfac, Inc. C. Brewer and Co.,Ltd, Castle and Cooke, Inc. Theo H. Davies and Co., Ltd. Bishop Trust Co., Ltd. Ij ^ Total

Number

2 5 4 2 2

JL_ 16

Percent 1/

21. 5 32 .1 22. .5 9. 2

12. .9 1. .7

100.0

_1/ Includes small quantities of sugar produced from independent growers' cane.

_2/ Produces sugarcane but does not operate a processing facility. Source: Hawaiian Sugar Planters' Association,

Other integrated cane sugar operations in the United States are less extensive and are limited to a few companies or cooperatives. In Florida two companies produce all and one company nearly all of the sugarcane they process. Only the Glades County Sugar Growers Cooperative operates both a raw mill and a refinery. In Louisiana, South Coast Corporation and South- down Sugars, Inc., each operates three mills and a refinery. In addition, Supreme Sugar Company, Inc., operates a raw mill and a refinery in Louisiana.

Three raw sugar cane mills in Florida (Sugar Cane Growers Cooperative, Inc., Osceola Farms Co., and Gulf and Western Food Products) entered into a joint venture, organized on a cooperative basis, to market their output to refiners.

The extent of any long term contractual arrangements between domestic raw sugar producers and cane refiners is not known. But few, if any, such relationships are in effect.

Raw sugar producers are members of industry trade associations whose objectives include the advancement of the sugar cane industry through public and legislative relations programs and the support of research. Such organizations include the Florida Sugar Cane League, Inc., the American Sugar Cane League, and the Hawaiian Sugar Planters' Association.

In summary, the degree of concentration of the raw cane sugar companies is highest in Florida and Hawaii and lowest in Louisiana and Puerto Rico. This degree of concentration does not seem excessive nor noncompetitive, given economies of size required in raw sugar mills.

13

Growers

The number of growers of sugar beets and sugarcane in the United States can best be established from the number of farms producing beets and cane, because few, if any, producers operate more than one farm. These two groups have undergone similar changes in structure since 1960, but they remain sufficiently different to warrant separate consideration.

Sugar beet growers

Sugar beet growers (farms) have decreased in number by about half since 1960 to a 1974 total of 12,000. The decline for selected years shows a similar pattern in all three major geographic areas with the Far West States having the sharpest decline (table 8) .

Table 8—Number of sugar beet farms 1/

Area t • 1960 • • 1965 •

• • • •

1970 • • • •

1973 • 1974 •

Far West Central Eastern

Total

: 2/ 3/ 4/

8,169 11,847 4,203

24,219

7,425 10,612 4,571

22,608

Numb ler of f

5,108 8,165 3,169

16,442

arms

4, 5, 1.

12,

,347 ,659 ,432 ,438

. 3,498 6,154 2,312

11,964

Ij Data for 1975 are not available. For detailed data see app. table 8, ¿/Far West in 1974 included Idaho's 1,456 farms, California's 1,137,

Washington's 645, plus 260 farms in Oregon and Arizona. \3^ Genträl in 1974 included Colorado's 1,455 farms, Nebraska's 1,022, Minnesota's 995, plus 2,682 farms in Wyoming, North Dakota, Montana, Utah, Texas, Kansas, and New Mexico*

4^/ Eastern in 1974 included only Michigan with 1,624 farms and Ohio with 688 farms. V

The trend toward fewer growers indicated for the three major areas was evident in all States, except for Minnesota and North Bakota. Between 1973 and 1974, the number of growers increased by 22 percent in Minnesota and by 40 percent in North Dakota. These increases resulted from three new sugar beet processing facilities which recently opened in those areas.

Despite the declining number of growers, sugar beet production increased markedl)^ from 1960 to 1974. It rose about 34 percent in total and as much as 46 percent in the Far West (table 9).

14

Table 9~Sugar beet production

• Area ] 1960 ;

• ; 1965 ; 1 *

; 1970 ; > •

1973 \ ; 1974 ; ; 1975 1/

Far West Central Eastern

Total

7,396 7,867 1.355 16,618

10,610 8,005 1,855

20,470

1,000

12,344 10,328 2,64a

25,320

tons

12,674 9,996 1,899

24,569

9,913 10,406 1,972

22,291

14,766 12,404 2,532

29,702

Note: For detailed data see app. table 9. 1/ Prediminary data.

California was the most important beet-producing State in 1974 with 5,923,000 tons, or 27 percent of the U.S. total. In 1975, California increased its production to 8,890,000 tons, or 30 percent of the total.

Much of the increase in production came from more than doubling the average acreage planted per farm by sugar beet growers in all areas between 1960 and 1974 (table 10), In Arizona, California and Kansas the average number of acres per farm was more than 200, but in Utah, Michigan, and Ohio the average was less than 50 acres.

Table 10~ Aver age number of sugar beet acres planted per f arm J^/

Area * 1960 ' 1^65 * 1970 V 1973 • 1974 • • • • •

Far West Central Eastern

Total 40.4 57.8 87.0 102.7 104.8

Note: For detailed data see app. tables 10 and 11. 1/ Data for 1975 are not available.

Although yields vary substantially among areas, they have increased considerably in each area since 1960, except for theCientral area (table II) • However, increases in sugar beet yields have not been proportionaliy so large as for many other crops, including corn, wheat, and cotton.

15

45.0 74.1 111.6 129.5 120,6 42.6 58.8 89.0 105.Q 116.3 23.8 29.1 42.7 49.4 50.1

Table 11—Tons of beets per harvested acre

Area ; 1960 ; • «

; 1965 ; ; 1970 ; ; 1973 : t *

1974 : 1975 u

Far West 20.3 19.9 22.5 24.0 23.8 24.5 Central 15.7 13.6 15.0 17.5 15.0 15.8 Eastern 13.9 16.0 20.5 16.3 17.4 19.4 Total 17.3 16.5 18.5 20.2 18.2 19.6

Note: For detailed data see app. table 12, l_/ Preliminary data*

Sugarcane growers

Sugarcane growers (farms) were located in Florida, Louisiana, Texas, Hawaii, and Puerto Rico in 1974. Like sugar beet growers, they too have decreased in number. The number of sugarcane growers dropped more than 76 percent since 1960 (table 12).

Table 12—Number of sugarcane farms l^f

Area ; 1960 ; 1965 ; 1970 [ 1973 ; 1974 « . • . •

Florida Louisiana Texas 2^/ Hawaii Puerto Rico

Total 18,214 13,744 7,793 4,864 4,301

Note: For detailed data see app. table 13. 2_/ Data for 1975 are not available. _2/ Texas commenced operations during the 1973 crop year and

became the first State to produce both cane and beets.

The most dramatic decline occurred in Puerto Rico where more than 12,000 farms, or 83 percent of the producing units, were consolidated or went out of cane production during 1960-74. The number of growers in Florida, unlike those in other States, has grown since 1960 and has shown relatively moderate variation since 1962 when there were 111 farms.

Production of sugarcane has not increased substantially in any area since 1960, except in Florida (table 13). Sugarcane in Texas is new. Louisiana and

16

13 178 135 136 135 2,547 2,218 1,589 1,290 1,180 91 96 681 578 504 393 339

14,973 10,770 5,565 2,954 2,551

Hawaiian producers had relatively stable output during 1960-75, Puerto Rico, on the other hand, experienced an almost steady annual decline in sugarcane production.

Table 13—Sugarcane production

Area • 1960 • • • • 1965 ; 1970 • • •

1973 ■ • • 1974 : 1975 \l

1,000 tons

Florida 1,554 5,505 5,671 8,119 7,482 10,116 Louisiana 5,583 6,542 6,927 6,570 6,558 6,488 Texas 2/ 620 901 1,250 Hawaii 8,613 10,738 10,457 9,645 9,083 9,485 Puerto Rico 10,001 8,807 5,891 3,621 3,585 3,520

Total 25,751 31,592 28,946 28,575 27,609 30,859

Note: For detailed data see app. table 13. \J Preliminary data. Ij Texas started operations during the 1973 crop year and became the

first State to produce both cane and beets.

The average number of acres per farm increased substantially in all areas since 1965 (table 14). Although variations were substantial in acreage per farm among some production areas, Florida producers far exceeded other areas in average farm size.

Table 14—Average number of sugarcane acres harvested per farm \J

Area • 1960 ; 1965 ; 1970 ; 1973 ; 1974 * • • • . •

Florida Louisiana Texas Ij Hawaii Puerto Rico

Note: Derived from app. table 13. \J Data for 1975 are not available. _2/ Texas started operations during the 1973 crop year and became the

first State to produce both cane and beets.

17

3,761.5 1,041.6 1,259.3 1,894.1 1,914.1 100.3 130.0 167.2 247.2 261.0 198.9 287.4

152.1 189.1 225.5 275.3 282.7 21.9 26.7 33.9 44.7 47.7

Yields of sugarcane per acre were relatively consistent within production areas during 1960-75 (table 15). Differences in yield data reflect the high Hawaiian yields which are mainly the result of the 2-year cropping system in Hawaii. They also reflect the more favorable production areas of Florida and Texas, compared with Louisiana.

Table 15—Tons of sugarcane harvested per acre

Area ' • • 1960 • • • 1965 • - ♦

1970 • • • 1973 • • •

1974 ; [ 1975

Flarida 31.8 29.7 33.4 31.5 29.0 35.2 Louisiana 21.9 22.7 26.1 20.6 21.3 21.1 Texas 1/ —._ 34.3 32.7 35.7 Hawaii 83.1 98.0 91.0 89.1 94.8 90.2 Puerto Rico 30.5 30.6 31.4 27.4 29.5 25.6 Average 35.0 36.3 39.2 34.2 34.0 35.3

J,/ Texas started operations during the 1973 crop year and became the first State to produce both cane and beets.

Production of sugar beets and sugarcane involves a relatively large number of growers in most production areas. Although differences in yields per acre for various beet and cane areas are apparent, costs of production for these areas are largely offsetting and thus minimize apparent regional advantages. High irrigation costs * for instance, make the higher yields less advantageous for the Far West sugar beet area than the lower yields and, in turn, lower costs of the Central and Eastern areas.

In the cane Industry, many of the raw cane mills have farming operations and produce their own or administration cane. The extent of this is greatest in Hawaii where 94 percent of the 1974 production was administration cane (table 16). The Florida industry started off in the early sixties on this basis then reversed itself, but recently it appears to be moving in that direction once again. In 1974, 67 percent of the Florida sugarcane production and 51 percent of the Louisiana production represented administration cane.

Sugar Distribution; Areas Served by Processors and Refiners

The present system for marketing refined sugar in the United States resulted from product type and location economics. Refined sugar is rather bulky, thus, transporation costs are a key consideration in production facility locations. The marketing system is characterized by a relatively small number of major supply centers serving relatively large distribution areas.

18

Table 16--Administrâtton cane and independent cane grown in 3 States

States and

crop years %J

Administration cane

Independent cane

: Admini s traición Total : cane as a per-

; centajge of total

1^000 short net tons of cane —'■ Percent

Florida:

1960 1965 1970 1973 1974

1,468 150 1,618 91 2,623 3,434 6,057 *43 2,612 3,059 5,671 46 3,894 4,225 8,119 48 5,019 2,463 7,482 67

Louisiana:

1960 1965 1970 1973 1974

2,568 3,058 5,626 46 3,117 3,380 6,497 48 3,371 3,380 6,751 50 3,369 3,200 6,569 51 3,334 3,224 6,558 51

Hawaii:

1960 1965 1970 1974

7,951 9,992 9,698 8,545

657 8,608 92 746 10,738 93 759 10,457 93 538 9,083 94

1/ Data after 1974 are not available.

Source: ÂSCS.

The present system of marketing sugar developed over the years. Large ^ cane sugar refinery operators found it economical to locate ttiBir proc€ssin& facilities in coastal areas near large metropolitan areas. This gave them easy access to imported raw cane sugar, and in the case of New Orleans refineries, also gave access to both Louisiana-grown and imported raw cane sugar.

The marketing characteristics of beet sugar are substantxally différent f tom that of cane sugar V Beet sugar production is generally Widely s cart ter èd over sparsely populated areas. Much of this sugar must l^e transporteä Ibn^ distances and marketed in competition with cane sugar that comes itxm : ; refineries generally more advantageously located.

19

The United States sugar industry is generally divided into seven regional sugar marketing territories (fig. 2). Generally their geographic locations correspond to their names: Northeast, Southeast, Gulf, Southwest, Chicago- West, Intermountain-Northwest, and the lower Pacific Coast. These marketing territories developed as refined sugar marketing firms sought large-volume distribution at the lowest possible transportation costs.

The Northeast area is a major market and typically has the highest prices (app. table 14). There is little competition from beet sugar, and cane sugar accounted for 94 percent of total deliveries in 1975, a 5-percent decrease from 1974., Eight coastal refineries in the Northeast import all of their sugar from foreign countries and Puerto Rico. The Northeast accounted for 27 percent of U.S. sugar deliveries in 1975, down from 32 percent in 1960.

Although small quantities of foreign sugar are imported at Savannah, Georgia, the Southeast's four refineries largely refine the Florida raw sugar output. Cane deliveries generally make up 95 percent of total deliveries in the South and 23 percent of U.S. deliveries.

The six Gulf refineries refine both Louisiana and imported raw sugar. Although neither the Northeast nor Southeast refiners sell ver}^ much sugar outside their own territories, the Gulf refiners market substantial quantities of cane sugar in the Northeast, Southeast, and Chicago-West territories.

The Southwest territory is largely supplied by its one cane refinery, however, beet and cane sugar is also brought in from other territories.

The Chicago-West territory (North Central States) with its concentration of large industrial sugar users must import large quantities of refined sugar from adjacent territories. It usually has the lowest sugar prices in the country, since nearly all processors and refiners compete actively in Chicago- West and use it to market their excess supplies that cannot be sold in their home territory. This competition has helped the growth there of major industrial sugar users. The Chicago-West territory receives refined sugar from beet sugar factories in the West and Northwest as well as cane sugar from the Gulf. Although cane sugar made up about 55 percent of total sugar deliveries in the North Central States in 1960 and in 1974, more typically it makes up about 44 to 47 percent. This region accounted for 34 percent of U.S. sugar deliveries in 1975, up from 30 percent in 1960. In a 1971 study, Ballinger concluded that the differences between Chicago-West and New York wholesale prices were directly related to the beet sugar's share of total deliveries to Illinois. The higher the percentage of beet sugar deliveries in Illinois, the lower Chicago-West prices became, compared to New York wholesale prices. \l

The competitive relationships between beet and cane also vary within the Chicago-West territory. Cane sugar normally accounts for about 50 percent of sugar deliveries in the eastern North Central Region, however, in Illinois beet sugar deliveries typically make up nearly two-thirds of total sugar

\l Ballinger, Roy A., "The Structure of the U.S. Sweetener Industry," Agr. Econ. Rpt. No. 213, Econ. Res. Serv., U.S. Dept. Agr., Sept. 1971.

20

WHOLESALE SUGAR PRICE QUOTATION REGIONS

ro

USDA ÑEG. ERS1029-75(3)

Figure 2

deliveries* Beet sugar also dominates the western North Central Region, usually accounting for about two-thirds of total sugar deliveries, although in 1975 beet sugar*s share slipped slightly to 61 percent.

Only two cane sugar refineries are in the North Central region. They are both medium-sized liquid sugar refineries; one is in Chicago and the other in St. Louis* In 1975, there were 17 beet sugar factories in this region; 6 were in Michigan-Ohio, 7 in the Red River Valley (Minnesota and North Dakota), and 4 in Kansas and Nebraska. In addition, one other beet facility is to start operating in the Red River Valley in 1976. Most of the increased growth of beet sugar in the North Central region has been in the Red River Valley.

Beet sugar dominates the West even more than in the North Central Region. Beet sugar accounted for about two-thirds of all sugar deliveries in the West in 1975, the highest share for beet sugar of any of the regions. About 16 percent of total U.S. sugar deliveries last year was in the West, up slightly from 14 percent in 1960.

The Intermountain Northwest region tends to have the highest beet sugar prices in the country. Ironically, it is a surplus production area; more beet sugar is produced than the area can consume. Much of its sugar must be transported long distances to the lower-priced Chicago-West market. This market behavior would be consistent with discriminatory pricing in which a firm can maximize returns by differentiating between markets. Recent lawsuits allege that several firms operating in the territory conspired to artificially maintain market differentials. These have not been contested by several of the processors because of litigation costs.

The lower Pacific Coast, like the Intermountain Northwest, also must ship much of its surplus sugar over long distances. Despite a growing population and a growing food processing industry, sugar production in the lower Pacific Coast continues to exceed deliveries in this territory. Lower Pacific Coast prifees are among the lowest in the United Statesv This reflects the keen competition between beet and cane sugars.

California is second to Illinois in sugar deliveries, and the two States together account for well over a fifth of total U.S. sugar deliveries. California accounts for about two-thirds of total sugar deliveries in the West.

Beet sugar accounts for two-thirds of California's sugar deliveries, and slightly more than two-thirds of sugar deliveries in the other Western States.

Only one cane sugar refinery is in the West, but it is the largest one in the United States. In addition, in 1975 there were 35 beet sugar factories. Ten of these were located in California; 7 in the Pacific Northwest, 1 in Arizona, and the remaining 17 in Montana, Wyoming, Utah, and Colorado.

Sugar Utilization

Total sugar deliveries increased 28 percent from 1960 to 1973 and then declined 12 percent between 1974 and 1975 (app. tables 15 and 16). Sugar

22

delivered for industrial use, after making provision for unspecified deliveries, increased nearly 31 percent from 1960 to 1975. Sugar for nonindustrial use decreased 14 percent (table 17). In 1975, industrial use accounted for two-thirds of total sugar deliveries, up from 54 percent in 1960; nonindustrial use accounted for the rest.

Industrial Use

Beverages (mostly soft drinks) constitute the largest single industrial use of sugar. Use in beverages represented more than 22 percent of total sugar deliveries in recent years, up from nearly 14 percent in 1960. Although actual volume of sugar used for beverages has almost doubled from 1960-75, there has been a decline in total usage for beverages in recent years.

Sugar used in various foods accounted for more than 40 percent of total deliveries, up slightly from 39 percent in 1960. Actual volum^e of sugar used in foods, adjusted to reflect unspecified deliveries, was 13 percent greater in 1975 than in 1960. The largest single food use is in cereal and bakery products. Direct deliveries for these uses accounted for 13 percent of total deliveries in 1975, but they do not include substantial quantities purchased by wholesalers and later resold to small- and medium-sized bakeries. Thus, sugar used for cereal and bakery products probably makes up about 17 percent of total sugar deliveries. Sugar use in bakery products increased more than a third from 1960 to 1970, but the level of deliveries has remained relatively stable since then.

Other important food products using sugar in 1975 included confectionery, which made up nearly 9 percent of deliveries; processed (including canned, bottled, and frozen foods; jams, jellies, and preserves) 8 percent; ice cream and other dairy products, more than 5 percent; and miscellan^eous and multiple foods, 5 percent. Sugar used in ice cream was 37 percent larger in 1975 than in 1960.

Nonfood industrial use in pharmaceuticals, toothpaste, tobacco, and similar uses accounted for 1 percent of total sugar deliveries in 1975, an increase of 30 percent since 1960.

Nonindustrial Use

The major nonindustrial use, deliveries to wholesalers, accounted for 21 percent of total sugar distribution in 1975, down from 30 percent in 1960. Total volume delivered to wholesalers in 1975 declined nearly a fourth from 1960. Wholesale deliveries are deliveries which are made in turn to smaller industrial users, retail grocery stores, and eating and drinking establishments. These businesses lack the volume requirements needed for purchasing directly from cane sugar refineries and beet sugar processors.

Retail grocers, including chainstores, and supermarkets, accounted for 14 percent of total sugar deliveries in 1975, down from nearly 15 percent in 1960. Deliveries to retail grocery stores increased about 5 nercent from 1960

23

Table 17--Deliveries of refined sugar by type of product or business of buyer

Type of product or business of buyer

1960 : 1973 1974 i 1975

1,000 1,000 1,000 1,000 cwt. Pet. cwt. Pet. cwt. Pet. cwt. Pet.

Industrial use: Bakery, cereal, and related

products 20,954 12.4 29,074 13.5 28,856 13.7 23,757 13„3 Confectionery and related products 16,077 9.6 20,704 9.6 20,374 9.7 15,334 8.6

Canned, bottled, and frozen foods; jams, jellies, perserves, and other 15,808 9.4 20,496 9.5 18,981 9.0 14,045 7.8

Ice cream and dairy products 7,313 4.3 11,901 5.5 11,404 5.4 9,755 5.4

Multiple use and all other food uses 5,938 3.5 10,040 4.7 10,278 4.9 9,357 5.2 Total food use 66,090 39.2 92,215 42.8 89,893 42.7 72,248 40.3

Beverages 22,970 13.6 49,387 22.9 46,992 22.3 40,390 22.6

Nonfood products 1,292 .8 2,221 1.0 2,557 1.2 1,681 .9

Total industrial use 90,352 53.6 143,823 66.7 139,442 66.2 114,319 63.8

Nonindustrial use: Hotels, restaurants, and

institutions 1,307 .8 1,879 .9 1,811 .9 1,423 .8 Wholesale grocers,

jobbers, and sugar dealers 50,591 30.0 41,268 19.2 40,043 19.0 37,089 20.7 Retail grocers, chain

stores, and supermarkets 24,454 14.5 26,325 12.2 27,071 12.8 24,626 13.8 All other deliveries,

including deliveries to Government agencies 1,755 1.1 2,125 1.0 2,421 1.1 1,640 .9 Total nonindustrial use 78,107 46.4 71,597 33.3 71,346 33.8 64,778 36,2

Unspecified deliveries 1/ — - — - — - _-_ - — — - 6,356 — -

Total deliveries 168,459 100.0 215,420 100.0 210,788 100.0 185,453 100.0

1/ It is assumed in conçjuting percentages that unspecified deliveries are proportionately distributed, that is, their distribution is typical of the distribution of other deliveries.

Source: Sugar Reports, ÁSCS and Sugar Market News, AMS.

24

to 1975, after adjusting for unspecified deliveries, but essentially the overall level of deliveries has not changed much since 1970. Retail grocers received about half the deliveries of consumer packages in the United States,

Direct deliveries by cane sugar refineries and beet sugar processors to eating and drinking places were less than 1 percent of sugar deliveries in 1975. All other deliveries, mainly to Government agencies and institutions, accounted for slightly less than 1 percent.

Deliveries by Form of Delivery

Consumer package deliveries (less than 50 pounds) accounted for about a fourth of total sugar deliveries since 1968, down from 34 percent-in 1960 (table 18). This leveling off of consumer package deliveries in recent years followed a long decline from about 70 percent of total sugar deliveries in 1935.

Deliveries in industrial packages represented 73 percent of all sugar deliveries in 1975, up from 66 percent in 1960. Industrial deliveries are in the form of large packages (50 pounds and larger), bulk dry, and liquid.

Large packages accounted for about a fifth of total sugar deliveries since 1972, down nearly 30 percent from 1960. The decline in large package use reflects a rising preference by industrial users for larger scale, bulk dry, and liquid sugar deliveries.

Bulk dry deliveries accounted for 33 percent of total sugar deliveries in 1975, compared with 14 percent in 1960. Overall, bulk dry deliveries are nearly three times greater today than in 1960. Economies of scale in use and the low prices of bulk dry sugar help explain its increased use.

Liquid sugar deliveries have accounted for about a fourth of total sugar deliveries since 1968 but have declined slightly to 23 percent in 1975. Only 16 percent of total sugar delivered in 1960 was in liquid form. Although the actual volume of liquid sugar deliveries in 1975 was 50 percent greater than the 1960 levels, there has been a downward trend in recent years. This suggests that these deliveries may have reached a limit, particularly with new high-fructose corn sirup expected to be available in substantially greater quantities in the future.

1974 Delivery Pattern

The pattern of sugar deliveries during 1974 is of special interest. Rising prices and expectations of even higher prices stimulated sugar deliveries in the second and third quarters. Raw prices peaked in November and started down in the fourth quarter of 1974. Downward pressure was triggered by strong buyer resistance which resulted in inventory depletion by users.

Some stockpiling by households was evident in the second and third quarters of 1974, but deliveries dropped sharply, especially in the first quarter of 1975.

25

Table 18--Refined sugar deliveries by tj^e of package or form of delivery

IV OS

Type of package or fotm of delivery

Liquid sugar Bulk dry Industrial and institutional

Total (piore than 50 pounds)

Consumer-size packages Unspecified deliveries 1/

Total deliveries

1960 1973 1974 1975

1.000 cwt.

27,607 22,910 60,615

Pet,

16.4 13.6 36.0

1,000 cwt.

54,129 68,338 42,350

Pet.

25.1 31.7 19.7

1.000 cwt,

48,719 66,396 44.056

Pet.

23.1 31.5 20.9

1,000 cwt.

111,132

57,327

66.0 164,817

34.0 50,603

76.5 159,171

23.5 51,617

75.5 130,909

24.5 48,188 6,356

Pet.

40,640 22.7 59,299 33.1 30,970 17.3

73.1

26.9

168,459 100.0 215,420 100.0 210,788 100.0 185,453 100.0

1/ It is assumed in computing percentages that unspecified deliveries are proportionately distributed, that is, their distribution is typical of the distribution of other deliveries.

Source: Sugar Reports. ASCS and Sugar Market News. AMS

Howeyer, large industrial users have limited bulk sugar storage capacity, and liquid sugar users cannot safely store liquid sugar for much more than 30 days without the risk of the sucrose inverting into its components—dextrose and fructose. This restricts the ability of large industrial users to stockpile sugar during periods of increasing prices. Third quarter U.S. sugar deliveries were nearly 3 million tons, the highest of any quarter of 1974. Stockpiling on the part of sugar users in anticipation of higher prices certainly helped contribute to higher prices in the fall of 1974.

Impact of Sugar Legislation on Industry Structure

U.S. production of sugarcane and sugar beets and the marketing of sugar produced from these crops were regulated from 1934 through 1974. The U.S. Sugar Act also regulated the importation of raw and refined sugar. In effect, sugar legislation regulated the farm production of cane and beets, sugarcane mills, beet sugar processors, and cane sugar refiners. This was accomplished by a system of sugar quotas.

"The Sugar Act, which established the quota system, directed the Secretary of Agriculture to determine U.S. sugar consumption requirements each year and to revise his determination as often as necessary during any year. The Sugar Act also provided rules for dividing consumption requirements among supplying areas, both domestic and foreign. Each area's allotment was known as its quota. Separate quotas for the domestic industry were provided for the sugar beet area, the mainland cane area (Louisiana and Florida), Hawaii, and Puerto Rico. Quotas were also established for each country exporting sugar to the United States. The Secretary was directed to establish marketing allotments for domestic area sugar quotas whenever they were needed to ensure orderly marketing. He also had power to establish acreage limitations for individual growers in any domestic area to keep production in the area in line with quota limitations." Ij

Under these provisions of the Sugar Act the industry generally prospered and grew at a rate in line with population growth. However, there were relatively few new entries to the industry. Those entries that did occur included new production, milling, and refining capacity for sugarcane in Florida in the sixties as a result of the Cuban embargo. Also, they included a new cane operation in the Lower Rio Grande Valley that began grinding cane in December 1973. Attempts were also made to establish sugar beets in Maine and New York late in the sixties. Although the New York venture failed and the factory was dismantled, the Maine facility, after being inoperative from the 1970 to 1975 crop years, is expected to slice the production from 10,000 acres of sugar beets in 1976. At least four new beet plants were successfully established during the sixties, and some existing facilities expanded. More

Ij Ballinger, Roy A., "The Structure of the U.S. Sweetener Industry." Agr. Econ. Rpt. No. 213, Econ. Res. Serv., U.S. Dept. Agr., 1971.

27

recently, the production and processing of beets in the Red River Valley have been expanded successfully.

Expansion of production favored the producer with experience in growing beets or cane. The Act also encouraged modernization and expansion of processing and refining facilities. Over time, a number of smaller, less efficient facilities have closed, especially raw cane mills and sugar beet factories plus a few of the older cane refineries.

By drastically limiting imports of refined sugar, the Act also afforded protection for cane refiners from foreign competition. On the other hand, the Act did not encourage the production of sugar for export.

One analysis of the sugar program's effects on cane refiners and beet processors places a high value on the resulting price stability. This was in sharp contrast to the erratic sugar prices of the twenties.

Returns to growers increased under the Sugar Act as prices stabilized. The Act itself provided for fair price determinations and assured an equitable share of returns for growers based on production costs, thus bolstering their bargaining position in negotiations with processors. New technology was adopted by processors which provided efficiencies and lowered their costs relative to producers. As a result, the relative share of price increases received by processors declined over time, while the producers' share increased.

"Under the participatory contract arrangement, the grower receives about 65 percent of the net return from beet sugar sales, and the processor retains the remaining 35 percent. However, the processor's profit performance has not kept pace with that of the growers. During the 16 sample years the USDA studied between 1951 and 1972, processors earned a return of more than 10 percent of net worth in only one year. The average net return was 7.31 percent." _3/

For cane sugar refining the profit picture is less clear, but it is likely below that for processing sugar beets. This leads to the point, often overlooked, that profits of refiners and beet sugar processors have generally not been sufficiently high enough to attract new capital or to encourage those now committed to retain their investments in such facilities. Figure 3 indicates the pattern of investment in the sugar cane refining and sugar beet industries. Heavy investment in the cane industry occurred after high prices in 1957 and for both beet and cane after the peak of the 1963/64 sugar cycle with its high prices.

New capital flowing into the processing of sugarcane or sugar beets has been largely from producers wanting to ensure an outlet for their product. The 1972 purchase of American Crystal Sugar Company by growers is a prime

3^/ "Staff Report on Sugar Prices." Office of Wage and Price Monitoring, Council on Wage and Price Stability, Executive Office of the President, May 1975, p. 81.

28

NEW CAPITAL EXPENDITURES IN US. SUGAR BEET PROCESSING AND SUGARCANE REFINING INDUSTRIES'"

$M IL."

Sugar beet ^ 60 —^

Sugarcane ¡ \/^

40

y w * *

20 —^^ /

^-« .#^^^ ^^^ ♦♦

0 1 1 M II 1 1 1 II 1 1 1 '54 '57 '60 '63 '66

* DA TA FOR 1958-72 ARE DEFLATED. O INTERPOLATED BETWEEN 1954 AND 1958. SOURCE: U.S. DEPARTMENT OF COMMERCE.

Figure 3

'69 '72

29

example of this kind of investment situation. Wl The once-proposed purchase of the Great Western Sugar Company by growers and the switch to cooperative ownership of several raw sugar mills, principally in Louisiana, represent similar developments.

The relatively low profit position of the leading sugar companies is substantiated in the Federal Trade Commission data. Among seven selected food industries, only distilled liquors has consistently ranked lower than sugar and confectionary products in rates of return (after taxes) on stockholders* investment in selected years from 1960 to 1973 (table 19).

Table 19—Rates of return (after taxes) on stockholders' investment: sugar industry compared to other food products

- .' ' - ■ .■ * Industry

• • 1960 ' ' 1965 • 1971 •

• • • • 1972 ' 1973

• • \J

Percent

Sugar and confection- ery products 7.4 9.2 10.0 7.9 10.1

Meat products 6.2 5.3 10.0 7.2 10.7 Dairy products 10.8 11.9 12.2 12.6 13.1 Bakery products Ij NA 11.8 12.1 9.9 7.3 Candy, chocolate and cocoa, and confection- ery products 11.9 13.7 11.3 16.1 10.7

Malt beverages 8.4 8.4 14.1 13.4 13.0 Distilled liquors 5.9 7.9 7.4 8.2 9.2

_1/ Data subsequent to 1973 not available» _2/ MA means not available. Source: Report of the Federal Trade Commission on Rates of Return in Selected Manufacturing Industries, 1961-73.

Narrowed to a group of the 12 largest sugar companies (8 largest in 1971, 1972, and 1973) their rate of return showed much variation. But in only 4 of the 14 years, 1960 to 1973, did returns rise to the 10-percent level, a level commonly exceeded by other industries since 1965 (table 20).

kj "News for Farmer Cooperatives," Farmer Cooperative Service, U.S. Dept, Agr., May 1975, p. 12.

30

Table 20—Rates of return (after taxes) on stockholders' investment for the 12 largest sugar companies, and rank among selected

manufacturing industries

Year Rate of return

Rank among selected industries 1/

Percent

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

2J 1971 1} 1972 2/ 1973

7, .4 7. .2 8 .1

10 .3 8, .3 9. .2

10. .0 9. .8 6. .9 3. ,3 8. .2

10, .0 7. .9

10. .1

27 24 24

. 16 31 28 26 24 34 35 16

3/ 14 26 24

\j Total number of selected industries ranged from 39 in 1960 to 33 in 1972 and 1973.

Ij For the eight largest companies. ^/ Two industries showed a 10-percent rate of return and ranked 14

and 15. Source: Report of the Federal Trade Commission on Rates of Return in

Selected Manufacturing Industries. Various issues.

In summary, sugar legislation protected the production and marketing segments of the industry, and thus it affected the industry structure. Growers benefited from prices in excess of those in the world sugar market, since the Sugar Act through its system of quotas limited the importation of sugar and subsidized growers through a system of grower payments.

Sugar beet processors and raw cane mills also benefited from the stable sugar prices afforded by import quotas. And cane sugar refiners especially benefited from the near total restriction on imports of refined sugar, which helped increase their volume. The generally higher U.S. sugar price (relative to the world price) has undoubtedly aided the development of the U.S. corn sweetener industry.

U.S. pricing policy, together with the import quota system and the uncertainties about U.S. import requirements from year to year, has been responsible for some inefficient production in countries whose output went to the U.S. sugar market.

31

How the U.S. sugar industry would have been structured, if there had been no sugar legislation, is less certain. At the beet processing and cane refining levels, marketings have about doubled since 1940. However, from 1950 to 1975 the number of beet factories decreased from 72 to 56, and refineries decreased from 30 to 23. Only a few new entries have occurred during this period.

If all protection from imported sugar were absent, producers with high costs of production would not have been able to compete in the long run. This would have reduced supplies for domestic raw cane mills and beet processors. Also, it would have made refineries more dependent on imported raw cane sugar. In short, sugar legislation has undoubtedly been responsible for increasing the size of the U.S. sugar industry, but the size of any such increases are difficult to quantify objectively.

32

PRICE MOVEMENTS

Comparing U«S. and World Prices

U.S. and world market prices increased dramatically during the first 11 months of 1974 (fig. 4). On the average, the New York spot price for raw sugar increased 15.5 percent per month from January through November of 1974, peaking at 64.5 cents the week of November 18. The average November 1974 raw sugar price of 57.3 cents per pound, New York basis, was 5.6 times the average of 10.39 cents per pound in 1973 (table 21). This increase was followed by an equally dramatic price decrease. The New York price averaged 22.47 cents per pound in 1975, and during the first 10 months of 1976 it averaged 13.90 cents. The September 1976 average of 9.80 cents was the lowest price since the April 1973 average of 9.65 cents.

In the past, the New York spot price tended to be 3 to 5 cents higher and more stable than raw sugar prices on the world market, undoubtedly because of the regulation provided by the U.S. Sugar Act. With the sharp price changes in 1974, the correspondence between the two prices increased. During 7 months of 1974 the average world price exceeded the New York spot price, and changes in the two price series were closely correlated. This also occurred when prices increased in a similar fashion in 1963 and 1964. Other increases in the world price have not had the same dramatic effect on prices within the United States. From 1960 to 1972 the world price of raw sugar was generally under 5 cents a pound, and from 1966 to 1968 it was less than 2 cents. World prices, on an adjusted New York basis, increased to 11 cents in 1973 and exceeded comparable U.S. sugar prices during most of 1974.

The reversal in the usual relationship between world and U.S. raw sugar prices is normal during periods of short supplies because of the more volatile nature of price on the world market. Historically, the world price exceeded the N.Y. spot in conjunction with supply deficits and sharp increases in the world price in 1950-51, 1957, and 1963-64. As shown in figure 4, world prices exhibit a strong cyclical pattern which appears to have an increasing amplitude. Sugar cycles result mainly from (1) an inelastic demand for the commodity which results in wide price changes with relatively small shifts in supply, and (2) a lagged industry supply response because of the high fixed investment needed to develop processing capacity and because of the fixed nature of investment once capacity is developed.

The price movement, which led to the most recent reversal of the world and U.S. price relationship, actually began before 1969. High world prices in 1964 led to overexpansion which caused depressed world prices late in the sixties. U.S. prices stayed well above world prices late in the sixties. But as early as 1967, the percentage difference started to narrow, and in 1972 monthly world prices exceeded monthly U.S. prices for a short period.

World supply response to higher prices was limited because of the experience with low prices late in the sixties and the poor financial status of many foreign producers after several years of 2 and 3 cents per pound for sugar. The average world price exceeded the average U.S. price by 0.7 cent per pound in 1973, reversing the usual price relationship in the two markets. This absolute difference increased slightly in 1974; however, the percentage

33

RAW SUGAR PRICES U.S. and World

7 À */•%.♦—...♦•.....J... .p^ «...♦•--♦»/♦"^

Z5r ^^'>*'Vv-i-.'W-*^ ^s^ ~-* ^,jiA!5Í':íj>!5<!^^

y*/x|x$Xv:v íiwiviíi-A'ivií:':*:' •^\. i ■:y:*:":va'>:*:':'ay¿^ '■ Ti If 1 1 1 1 1 r 1 1

^/LB.

56

54

52

'50 '53 '56 '59

us. Price

Difference <U.S. Price over World Price)

U.S. Price under World Price

.L_J I I I I I L_J.

;*'

'60 '63 '66 '69

Figure 4

34

Table 21--Comparing world and U.S. sugar prices

Î Transportation^* Year and : World sugar : insurance and : World price. U.S. sugar price, Difference between U.S.

month : price 1/ : duty to New York basis New York basis and world prices, New York

: New York 2/ : basis 3/

Cents per pound

1960 : 3.14 0.95 4.09 6.30 2.21 1961 : 2.91 .94 3.85 6.30 2.45 1962 : 2.98 • 89 3.87 6.45 2.58 1963 : 8.50 .91 9.41 8.18 -1.23 1964 : 5.87 .92 6.79 6.90 .11 1965 2.12 .95 3.07 6.75 3.68 1966 : 1.86 .96 2.82 6.99 4.17 1967 : 1.99 .96 2.95 7.28 4.33 1968 : 1.98 .98 2.96 7.52 4.56 1969 : 3.37 1.00 4.37 7.75 3.38 1970 : 3.75 1.13 4.88 8.07 3.19 1971 : 4.52 1.13 5.65 8.52 2.87 1972 : 7.43 1.11 8.54 9.09 .55 1973 9.61 1.38 10.99 10.29 -.70 1974 : 29.99 1.63 31.62 29.50 -2.12 1975 : 20.49 1.43 21.92 22.47 .55

1963: January ': 5.41 .89 6.30 6.70 .40 February : 6.06 .89 6.95 6.80 -.15 March : 6.62 .89 7.51 7.04 -.47 April : 7.65 .89 8.54 8.26 -.28 May 10.36 .91 11.27 11.08 -.19 June 9.92 .90 10.82 8.70 -2.12 July 9.05 .90 9.95 7.95 -2.00 August 6.63 .90 7.53 6.65 -.88 September 7.63 .91 8.54 7.45 -1.09 October 10.67 ,93 11.60 9.42 -2.18 November 11.63 .94 12.57 9.34 -3.23 December 10.36 .94 11.30 8.78 -2.52

1964: January 10.64 .93 11.57 9.29 -2.28 February 9.11 .93 10,04 8.02 -2.02 March 7.43 .93 8.36 7.33 -1.03 April 8.05 .92 8.97 7.43 -1.54 May 7.12 .92 8.04 6.65 -1.39 June 5.33 .92 6.25 6.45 .20 July 4.80 .92 5.72 6.25 .53 August 4.37 .92 5.29 6.18 .99 September 3.71 .92 4.63 6.20 1.57 October 3.70 .92 4.62 6.27 1.65 November 3.40 .92 4.32 6.17 1.65 December 2.96 .92 3.68 6.55 2.87

1973: : January : 9.40 1.26 10.66 9.38 -1.28 February * 9.06 1.28 10.34 9.14 -1.20 March 8.89 1.31 10.20 9.45 -.75 April : 9.06 1.31 10.37 9.65 -.72 May ; 9.67 1.32 10.99 10.06 -.93 June : 9.77 1.36 11.13 10.25 -.88 July : 9.81 1.40 11.21 10.25 -.95 August : 9.09 1.41 10.50 10.75 .25 September : 9.01 1.43 10.44 10.97 .53 October : 9.56 1.47 11.03 11.15 .12 November : 10,14 1.50 11.64 11.10 -.54 December : 11.83 1.52 13.35 11.34 -2.01

See footnotes at end of table. Continued-

35

Table 21--Comparing world and U.S. sugar prices -»Continued

• Transportation; Year and : World sugar insurance and : World price, U.S. sugar price. Difference between U.S. month : price 1/ duty to :

New York 2/ : New York basis New York basis and world prices. New York

basis 3/

Gents per pound

1974: January : 15.32 1.55 16.87 12.63 -4.24 February : 21.28 1.55 22.83 17.09 -5,74 March : 21.27 1.59 22.86 18.11 -4.75 April : 21.77 1.63 23.40 19.25 -4,15 May : 23.65 1.75 25.40 23.05 -2,35 June : 23.67 1.73 25.40 26.30 .90 July : 25.40 1.66 27.06 28.35 1.29 August : 31.45 1.63 33.08 32.60 -.48 September : 34.35 1.60 35.95 33.71 -2.21 October : 39.63 1.67 41,30 38.83 -2.47 November : 57,17 1.67 58.84 57.30 -1.54 December 44.97 1.58 46.55 46.74 .19

1975; January 38.32 1.47 39.79 40.15 .36 February 33.72 1.50 35.22 36.07 .85 March 26.50 1.50 28.00 28.52 .52 April 24.06 1.50 25.56 26.07 .51 May 17.38 1.43 18.81 19.27 .46 June 13.83 1.42 15.25 15.96 .71 July 17.06 1.42 18.48 19.89 1.41 August : 18.73 1.37 20.10 21.11 1.01 September : 15.45 1.39 16.84 17.36 ,52 October : 14.09 1.40 15.49 15.45 -.04 November : 13.40 1.40 14.80 15.03 .23 December ; 13.29 1.40 14.69 14.80 .11

1976: \ January : 14.04 1.38 15.42 15.42 February ; 13.52 1.38 14.90 15.04 .14 March : 14.92 1.45 16.37 16.27 -.10 April : 14.06 1.45 15.51 15.58 .07 May : 13.85 1.45 15.30 15.25 -.05

1/ Sugar stowed at Greater Caribbean ports including Brazil. 2/ Includes duty of 0.625 cent per pound. 3/ Quota premium when U.S. price exceeds world price. Quota discount when world price exceeds

U.S. price.

Source: Sugar Re£or^s, ÁSCS; Sugar Market News, AMS; Sugar and Sweetener Report. AMS and ERS.

36

difference in prices remained about the same, although prices increased fivefold. Compared to the overall price movement in 1974, the difference between U.S. and world prices was very small and the prices were highly correlated, (r = 0.9815, monthly data from January 1973 to April 1975). There is little doubt that the main factors causing high sugar prices in the United States in 1974 were tight world supplies and high world sugar prices.

The New York and World Spot Prices

The basic U.S. sugar price is the New York spot raw price quotation, currently No. 12 contract, of the New York Coffee and Sugar Exchange, duty paid, or duty free. The previous full duty rate of $0,625 per hundredweight was increased to $1,875 per hundredweight on September 21,1976. This quotation is commonly referred to as the U.S. domestic raw price. The entire pricing structure of the domestic sugar industry is directly or indirectly influenced by the New York spot price. The exchange establishes the spot price for the purpose of determing the value of raw sugar in the event of a contract default. The New York spot price attempts to accurately reflect the actual value of raw sugar sold to New York and other Northeast refineries by exporters in foreign countries and Puerto Rico.

The quotation or spot is determined each trading day by a committee of five members of the e^^change who are in the domestic raw sugar business. Two members are refinery raw sugar buyers, and the other three are raw sugar merchants (brokers). Because of its importance in the Northeast, Amstar is usually represented on the committee. The committee considers all available information related to sales, bids, and offers in determining the proper spot quotation for a particular day. In the absence of any sales, bids, or offers, the committee is authorized to make the spot price on the basis of the tone of the market. This price is usually announced between 2 and 3 o'clock, just before the close of the futures market.

The domestic spot committee attempts to reflect in their daily spot quotation all of the transactions taking place between sugar operators (brokers) and U.S. refiners. The New York spot price is a judgmental price derived by consensus. It does not necessarily represent actual transactions. There are a limited number of buyers an4 sellers and a limited number of large transactions. Few sugar transactions oc^cur on any one day and sometimes none occur for several days. In these instai^ces, the spot price is frequently determined to be the same as the previous day. Transactions are generally limited to cargos of 10,000, 20,000, an4 50,000 tons of raw sugar, the normal sizes of purchases.

i

The New York Coffee and Sugar Exchange indicates they are not responsible for actions in the commercial raw sugar market. Commercial buyers and sellers may use the spot quotation for determining values at their own risk.

Another price of considerable importance is the world spot price (f.o.b., stowed at Greater Caribbean Ports including Brazil). This is also established daily by the New York Coffee and Sugar Exchange, but it is independent of the New York spot price. The world price is established by a five-member committee of raw sugar merchants. During 19 74 and since the termination of

37

the U.S. Sugar Act on December 31, 1974, the two prices have tended to parallel each other, except for the duty and the costs of moving sugar from Caribbean ports to landing in the Northeast.

The two committees essentially perform two functions. They determine a representative price of sugar in the U.S. and world markets at any given time, and they provide a current benchmark price as a basis for determining prices for liquidating futures contracts. All members on both committees represent companies which hold seats on the New York Coffee and Sugar Exchange.

Basing Point Pricing

In the United States, sugar is priced in accordance with a basing point pricing system. With this system the price of sugar in a given area or terri- tory is determined by the base price at the major supply center for the area.

Because sugar is a relatively homogeneous product, other sellers who wish to compete in the territory must meet the price offered by sellers at the major supply center, which becomes the "basing point" for the area. When a seller is located less advantageously to customers than sellers at the basing point, his transportation cost will be higher; however, by absorbing the extra cost of transportation, he can still meet the price offered by these sellers. On the other hand, if he is located more advantageously to the buyer than are the sellers in the major sugar supply center, he can take advantage of his position and charge the buyer a delivered price which reflects the cost of transportating sugar from the basing point. Since thé actual freight cost would be less than the "prepay" which is included in the delivered price, this yields him a higher return on the sale.

Over time, this need to price advantageously, relative to the dominant suppliers in an area, led to the development of freight "prepays" which reflect the charge for transporting sugar from the major supply center to the destinations of buyers. To arrive at the delivered price for a particular buyer, the seller determines the applicable prepay which is then added to the f.o.b. quotation. I^Then the shipment is made, the seller pays the actual charge for transportation. It may equal or be more or less than the prepay which would be billed to the buyer.

The United States has seven basing point areas: Northeast (Boston, New York, Philadelphia, and Baltimore), Southeast (Savannah), Gulf (New Orleans), Chicago-West (New Orleans and San Francisco), Southwest (Sugarland, Texas), the Lower Pacific Coast (San Francisco), and the Northwest Intermountain States (San Francisco). These are the locations of one or more large raw cane sugar refineries and are principal sugar supply centers for each area.

A large part of the sugar which cannot be economically marketed in other basing point areas is moved into the Chicago area market, which is a major manufacturing center for such processed foods as candy and soft drinks. Because o£ its large size and demand characteristics, the Chicago market can absorb large quantities of sugar without precipitating price decreases. This makes the Chicago area an attractive market.

38

of particular interest is the relationship between the New York spot price and basing point prices for sugar in each territory. The New York spot price is closely related to the price that refiners must pay for raw sugar. Basing point prices for refined cane sugar in the Northeast, Southeast, Gulf, and Chicago-West areas are also directly related to the New York spot price. %J The price that refiners must pay. for domestic raw sugar from Florida, Louisiana, and Texas is determined through contracts with raw mills. Under provisions of these contracts, the raw sugar spot quotation of the New York Coffee and Sugar Exchange, currently Contract 12, is the principal determinant of the price refiners pay to the raw mills for sugar. So, the entire structure of sugar prices for the eastern half of the United States is closely tied to the New York spot price and recently indirectly to the world price of sugar. Refiners are locked into paying for their raw product based on the New York spot price, but they are free to purchase either domestic or imported raw sugar. Before January 1, 1975, purchases had to fall within the limits on imports and domestic quotas imposed by the Sugar Act.

The situation is more flexible and prices are not so closely related to the New York spot price in the western half of the country, including beet sugar in the Chicago-West, Intermountain Northwest, Lower Pacific, and Southwest territories and cane sugar in the Lower Pacific area. Beet processors generally have joint participation contracts with growers, and proceeds dépend on the selling price of refined beet sugar. Cane sugar from Hawaiian raw sugar is produced mainly at the C & H refinery in California. The Hawaiian big five and independent producers operate on a "toll" arrangement with C & H. So their returns are also based on the price of the refined cane sugar sold. Recognizing this distinction between eastern and western sugar prices facilitates understanding the structure of sugar prices in the United States and also the price behavior during and after 1974.

Wholesale Prices

Wholesale sugar prices are reported for eight geographic areas of the United States. Prices in the five most important areas are presented in table 22. Actual prices in the areas sometimes differ from the reported price because of competitive conditions. Also, price is not the only consideration in determining sales. A small reported price difference may be a misleading indicator of the price at which a large quantity of sugar may be sold to major institutional buyers. Institutional rigidities also limit the shortrun response to small differences in price as buyers may be reluctant to shift from one supplier to another and disrupt longterm market relationships.

In the past, wholesale prices tended to be slightly higher in the Northeast than in other basing point areas, and until 1974 they were 3 to 4 cents more than the New York spot price (table 23)• This differential increased to 4.85 cents a pound in 1974 and further increased to 8.95 cents in 1975. Southeast prices until 1974 were running 0.3 to 0.4 cent per pound less

j6/ Larkin, L. C, "Marketing Practices and Price Spreads for Sugar 1960-72," Ag7. Econ. Rpt. No. 289, May 1975. Also, see appendix B for a detailed discussion of 1974 pricing arrangements.

39

Table 22—Silgar prices since I960

: U.S. raw : ¡sugar price,: :duty paid at:

Refined cane sugar prices 1/ : Refined beet sugar prices 1/

Period U.S. retail

'northeast [Southeast • Gulf |Chicago-West ' [Pacific Coast 1 Chicago-West] Pacific Coast

! Kew York : Cents per pound

i960 : 6.30 11.63 9M 9.1«3 9.39 8.97 8.96 8.77 8.96 1961 ! 6.30 11.77 9.ító 9.25 9.23 8.76 3.81t 8.59 8.81+ 1962 : 6.k5 11.70 9.60 9.17 9.03 9.15 9.07 8.95 9.07 1963 ! 8.18 13.58 11.9^ 11.Í+5 11.30 10.90 10.71 IO.3I+ 10.71 1961^ : 6.90 12.18 10.68 9.90 9.82 9.58 9.85 9.38 9.85 1965 ! 6.75 11.80 10.22 9.53 9.1+1+ 9.35 9.2lt 9.15 9.2I+ 1966 6.99 12.01; 10.36 9.89 9.87 9.6h 9.55 9.M+ 9.55 1967 : 7.28 12.19 10.62 10.32 10.2lt 9.82 10.11 9.70 10.11 1968 ! 7.52 12.18 lO.Slf 10.59 10. If 5 9.9Í+ 10.35 9.9»+ 10.35 1969 : 7.75 12.UO ll.lA 10.85 10.50 10.23 IO.1I+ 10.23 10.11+ 1970 8.07 12.97 11.97 n.i+i ll.Olt 11.08 10.79 11.08 10.79 1971 ! 8.52 13.61 12.U8 12.07 11.57 11.59 11.37 11.59 11.37 1972 ! 9.09 13.91 13.09 12.71+ 12.lU 11.82 11.65 11.82 11.65

*. 1973 : , 10.29 15.10 1ÍI-.07 13.78 13.11+ 12.1+8 12.38 12.38 12.38 0 I97I; ! 29.50 32.3lt 3*^.35 3U.3U 31+.16 3Í+.27 32.12 32.07 31.90

1975 ! 22. U7 37.16 31. te 31.03 31.1+1+ 31.58 27.97 27.61 27.87

1973: ' •

January- 9.38 li;.l2 13.15 12.75 12.20 11.65 11.1+5 11.65 11.1+5 February : g.ii^ lit.2!+ 13.18 12.75 12.03 11.65 11.1+5 11.65 11.1+5 ííarch : 9.^5 ll+.3'^ 12.9*^ 12.55 12.00 11.55 11.69 11.55 11.69 April 9.65 lU.te 13.30 12.95 12.1+0 11.75 11.85 11.75 11.85 May ; 10.06 ll;.58 13.55 13.20 12.65 11.87 II.9I+ 11.87 11.91+ June ; 10.25 llt.8li 13.96 13.61 13.06 11.95 12.10 11.95 12.10 July • 10.25 ll;.92 l!;.05 13.68 13.12 11.95 12.10 11.95 12.10 August : 10.75 15.06 lit. 50 lit. 15 13.1+8 12.36 12.10 11.95 12.10 September ¡ 10.97 15.36 lit. 80 lit. 50 13.75 13.1+8 13.01 12.99 13.01 October ; 11.15 15.98 li^.95 iu.85 llf.lO 13.95 13.60 13.95 13.60 NovBmber ! 11.10 16.50 15.13 15.03 II+.28 I3.81t 13.60 13.69 13.60 December j , 11.3*^ 16.78 15.33 15.30 11+.55 13.80 13.61+ 13.61t 13.61+

197^^: ; January ! 12.63 16.96 15.65 15.55 1I+.80 1I+.87 lit.81 ll+.6lt 1I+.79 February ; 17.09 17.76 18. U9 18.1+9 18.09 18.09 19.06 17.80 19.02 March ; 18.11 20.80 20.90 20.90 20.50 22.12 22.51 20.18 22.23

Continued—

Table 22-Sugar prices since 1960—Continued

Period

1974—Con.: April May June July- August September October November December

1975: January Februarjí- March April May June July August September October November December

1976: January February March April May

raw U.S sugar price, duty paid at Hew York

Refined cane sugar priceaí./ U.S.:

retail:Northeast Southeast Gulf

19.25 23.05 26.30 28.35 32.60 33.71 38.83 57.30

U0.15 36.07 28.52 26.07 19.27 15.96 19.89 21.11 17.36 15.î^5 15.03 1U.80

15.1+2 15. oU 16.27 15.58 15.25

22.96 2I+.86 28.32 32.lU 3U.88 37.96 U1.68 k6.9h 62.76

58.92 53.60 1+9.52 U1.80 36.86 31.'+'+ 26.88 30.90 32.08 30.32 27.2U 26.3k

25.88 25.38 25. Oit 25.06 2!+. 80

23.78 27.61 3I.0Í+ 32.50 36.83 U0.7I+ 1+3.59 60.69 6o.ii-l

52.95 U8.96 U0.50 37"-01 32.23 25.57 26.89 27.05 23.30 21.15 20.81^ 20.53

21.31 20.86 22.20 21.1+1 21.87

23.78 27.27 31.16 32.1+0 36.83 l<-0.7l+ 1+3.59 60.90 60. In

52.95 U8.96 lt0.50 36.70 29.1+0 2Î+.37 26.k6 27.31 23.1+1 21.1I+ 20.68 20. U?

21.33 20.61 21.87 21.01 21.55

Chicago-West Pacific Coast

Refined beet sugar prices^-^

Chicago-West Pacific Coast

Cents per pound 23.38 27.12 31.16 32.UO 36.83 14-0.71+ 1+3.59 60.90 60.1+1

52.95 1^8.96 1+0.50 37.01 32.23 25.57 27.18 27.10 23.28 21.15 20.79 20.53

21.31 20.86 22.20 21.1+1 21.87

23.73 27.07 31.16 32.25 36.30 U0.7I+ 1+3.59 60.90 60.kl

52.95 I18.96 UO.5O 37.01 32.23 25.57 26.89 28.19 26.38 21.80 19.75 18.71

18.30 18.30 18.30 18.30 18.70

23.80 21.99 27.56 26.65 30.01 30.1+0 30.65 32.15 33.15 33.93 35.00 36.19 kl.6l 1+0.17 51+.0U 5I+.68 53.22 56.02

1+6.35 1+6.69 In.68 1+1.99 3I+.30 33.88 31.80 30.80 26.73 25.33 21.61+ 21.11+ 23.28 22.17 25.95 26.18 23.1+7 25.35 20.TJ 20.1+1+

20.13 18.98 19.55 18.1+2

19.1+5 18.30 18.95 18.30 18.95 18.30 18.95 18.30 19.37 18.68

23. 26.

35 78

29.88 30.10 33.15 35.00 1+1.21 5I+.0I+ 53.22

U6.35 1+1.68 3I+.30 31.80 26.73 21.61+ 22.02 25.95 23.1+7 20.77 20.13 19.55

19.1+5 18.95 18.95 18.95 19.37

1/ These are basis prices in 100-pound paper bags, not delivered prices. To obtain delivered prices, add "freight

prepays" and deduct discounts and allowances. ^ ^ , -ro- Source: Sugar Reports, ASCS; Sugar Market News, MS; Sugar and Sweetener Report, AMS and iilo.

Table 23—Difference betw^een the ralv su^ar price axi^ wholesale and retail prices for refined cane sugar and for "beet sugar since 19^0

U.S. raw : Difference after subtracting raw sugar price from the—

Refined cane sugar price Refined beet sugar price Period

: sugar price,: : duty paid :

U,S. Î retail ¡ :

, at lew York : price ¡Northeast;Southeast : Gulf :Chicago-West ;Pacific Coast .Chicago-West, Pacific Coast

E Gents per pound

i960 6.30 5.33 3.13 3.10 3.09 2,67 2.66 2.47 2.66 1961 6.30 5.^7 3-10 2.95 2.93 2.46 2.54 2.29 2.54 1962 ! GM 5.25 3.15 2.72 2.58 2.70 2.62 2.50 2.62 1963 8.18 5.^0 3.76 3.27 3.12 2.72 2.53 2.16 2.53 I96J1 6.90 5.28 3.78 3.00 2.92 2.68 2.95 2.48 2.95 1965 6.75 5.05 3.^7 2.78 2.69 2.60 2.49 2.40 2.49 1966 6-99 5.05 3.37 2.90 2.88 2.65 2.56 2.45 2.56 1967 7.28 Í+.9I 3.3^ 3.04 2.96 2.54 2.83 2.42 2.83 1968 Î 7.52 h.66 3.32 3.07 2.93 2.42 2.83 2.42 2.83 1969 : 7.75 h.63 3-69 3.10 2.75 2.48 2.39 2.48 2,39

^ 1970 : 8.07 ^.90 3.90 3.34 2.97 3.01 2*72 3.01 3.72 ro i(^YX 8.52 5.09 3.96 3.55 3.05 3-07 2.85 3.07 2.85

197a Í 9.09 1^.82 1^.00 3.65 3.05 2.73 2.56 2.73 2.56 1973 : 10.2Q i|.8l 3.78 3.49 2.85 2.19 2.09 2.09 2.09

197^ : 29,50 2.8Í+ 4.85 4.84 4.66 4.77 2.62 2.57 ¿.40

1975 22. U 7 1U.69 8.95 8.56 8.97 9.11 5.^0 5.1^^ 5.40

1973: January ': 9.38 k.7k 3.77 3.37 2.82 2.27 2,07 2.27 2.07 February : 9-l^ 5.10 k.ok 3.61 2.89 2.51 2.31 2.51 2.31 March : 9.U5 U.89 3.49 3.10 2.55 2.10 2.24 2.10 2.24 April : 9^65 ^.77 3.65 3.30 2.75 2.10 2.20 2.10 2.20 May : 10.06 U.52 3.49 3.14 2.59 1.81 1.88 1.81 1.98 June : 10.25 ^.59 3.71 3.36 2.81 1.70 1.85 1.70 1.85 July : 10.25 U.67 3.80 3.43 2.87 1.70 1.85 1.70 1.85 Alagust Î 10,75 U.31 3.75 3.40 2.73 3..6I 1.35 1.20 1.35 September : 10.97 Í+.39 3.83 3.53 2.78 2.51 2.04 2.02 2.04 October : 11.15 ii.83 3.80 3.70 2.95 2.80 2.45 2.80 2.45 November : 11-10 5.i^o 4.03 3.93 3.18 2.74 2.50 2.59 2.50 December Í 11.3^ 3M 3.99 3.96 3.21 2.46 2.30 2.30 2.30

V Continued—

Table 23—Difference between the raw sugar price and wholesale and retail prices for refined cane sugar and for beet sugar since 1960—Continued

U.S. raw ; sugar price,'

Difference after subtracting raw sugar price from the~

TT «Î Refined cane sugar price Refined beet sugar price

Period : duty paid ^

at New York . retail

price

[Northeast; Southeast Gulf Chicago-West [Pacific Coast Chicago-West Pacific Coast

Cents per pound 197^:

January : February : March : April : May : June : July : August : September : October : November : December :

12.63 17.09 18.11 19.25 23.05 26.30 28.35

Î4.33 .76

2.69 3.71 1.81 2.02 3.79

3.02 l.i^O 2.79 Í+.53 k.5è k.7h h.l5

2.92 l.i+0 2.79 k.53

U.86 U.05

2.17 1.00 2.39 ii.13 h.Ol Î+.86 U.05

2.2h 1.00 l+.Ol kM U.02 U.86 3.90

2.18 1.97 u.uo k.55 U.51 3.71 2.30

2.01 -71

2.07 2.7^ 3.60 U.IO 3.80

2.16 1.93 14-.12 U.IO 3.73 3.58 1.75

32.60 33.71 38.83 57.30 h6.7h

2.28 U.25 2.85

-(10.36) 16.02

if.23 7.03 1^.76 3.39

13.67

h.23 7.03 k.76 3.60

13.67

Í+.23 7.03 U,76 3.60

13.67

3.70 7.03 U.76 3.60

13.67

.55 1.29 2.78

-(3.26) 6.U8

1.33 2.U8 1.3i^

-(2.62) 9.28

.55 1.29 2.38

-(3.26) 6M

1975: : January ! February March April May June July August September October November December

U0.15 36.07

; 28.52

18.77 17.53 21.00

12.80 12.89 11.98

12.80 12.89 11.98

12.80 12.89 11.98

12.80 12.89 11.98

6.20 5.61 5.78

6.5^^ 5.92 5.36

6.20 5.61 5.78

26,07 Î 19.27 : 15.96 : 19.89 : 21.11 : 17.36 : 15.^5 : 15.03 : IÍ+.80

15.73 17.59 15 M 6.99 9.79

lU.72 1I+.87 12.21 11.5^+

10.9^ 12.96 9.61 7.00 5.9^ 5.9^ 5.70 5.81 5.73

10.63 10.13

8.1+1 6.57 6.20 6.05 5.69 5.65 5.67

10.9^ 12.96 9.61 7.29 5.99 5*9Z 5.70 5.76 5.73

10.9^ 12.96 9.61 7.00 7.08 9.02 6.35 U.72 3.91

5.73 7.U6 5.68 3.39 U.-8U 6.11 5.32 5.10 U.'75

U.73 6.06 5.18 2.28 5.07 7.99 1+.99 3.95 3.62

5.73 iM 5.68 2.13

6.11 5.32 5.10 it.75

1976: January February March April May

: 15.^2 : 15.Oil : 16.27 : 15.58 : 15.25

lO.i+6 10.3^^ 8.77 9M 9.55

5.89 5.82 5.93 5.83 6.62

5.91 5.57 5.60 5.U3 6.30

5.89 5.82 5.93 5.83 6.62

2.88 3.26 2.03 2,72 3.1^5

U.03 3.91 2.68 3.37 U.12

2.88 3.26 2.03 2.72 3.^3

It.03 3.91 2.68 3.37 U.12

Source: Derived from table 22.

than the Northeast and in recent years 0.6 cent ahead of Gulf prices. In generals the lowest U.S. prices have been in the Chicago-West and Pacific Coast markets where beet and cane sugar are most competitive and where much of the sugar sold is not directly tied to the New York spot price.

U.S. sugar prices declined slightly following increases in world prices early in the sixties and then began a gradual increase, which accelerated early in the seventies. Prices finally exploded in 1974. Wholesale prices reflected these increases and generally maintained their relative ranks throughout the period. In essence, the entire structure of basing point prices in the United States is highly correlated and tied together through competitive pressures and contractual arrangements.

But, the spread between the highest and lowest average wholesale prices among the areas has increased, particularly after the defeat of sugar legislation by the House of Representatives in June 1974 (table 24). This increase shows that the list prices of beet and cane sugar on the Pacific Coast and of beet sugar in the Chicago-West market became cheaper, relative to cane sugar prices in the southern and eastern markets and also in the Chicago- West market. This relationship has not changed since the drop in raw sugar prices began in November 1974, and if anything, the spread in list prices has widened to about 5 or 6 cents. From indicators during the latter half of 1975, it appears that this spread is returning to more normal levels.

The data of table 24 show competitive conditions in the sugar industry in 1974. In the Northeast (an area mainly dependent on imported raw cane sugar, which is closely tied to the world market through the New York spot price), 1974 started with sharply rising world prices and with refiners taking below normal margins as they worked off sugar acquired at lower prices. From April through October, the trend toward rising prices was even more pronounced. Refiners increased prices about 4.5 cents above the New York spot price, which was about 0.5 cent above the norm of 1972 and 1973 but reasonable, assuming higher refining costs. In mid-November the market peaked, and margins dipped. But from December 1974 through May 1975, the refiners* margin had increased three times more than normal levels. This reflected the difficult position, in a falling market, of refiners accumulating raw sugar based on a declining New York spot price. Prices and processing margins have continued to decline since May 1975. Eastern prices have remained higher than prices in the West, despite strong pressure from Western beet and Hawaiian cane sugar. Eastern margins, although declining, have continued higher than was the case under the Sugar Act.

During the same 1974-75 period. Pacific Coast refined cane sugar prices (Hawaiian cane) followed a different pattern. In January and February 1974, the refined price was about 2 cents more than the New York spot price, and it was about 0.5 cent less than at the end of 1973 but near normal. From April through June, the spread increased to twice the normal price differential of 4 to 4.5 cents, reflecting eastern cane prices and a short beet crop. But with the House action in June 1974 and with increasing inventories of beet sugar, despite a short crop, the western cane price differentials retreated to more normal levels. Prices even averaged 3.25 cents less than the New York spot price in November 1974. Since November 1975, the difference between the Pacific Coast refined cane price and the New York spot price has fallen to 2

44

Table 24--Spread between the highest and lowest average wholesale prices of refined sugar for five major pricing areas

U.S. raw sugar Spread

: relative to Period ] Spread price, duty paid : U.S. raw

at New York : sugar price

—Cents per pound Percent

1965 : 1.07 6.75 15.9 1968 : .90 7.52 12.0 1970 : 1.18 8.07 14.6 1972 : 1.44 9.09 15.8 1973 : 1.69 10.29 16.4 1974 : 2.45 29.50 8.3 1975 : 3.97 22.47 17.7

1974: : January ; 1.01 12.63 8.0 February : 1.26 17.09 7.4 March : 2,33 18.11 12.9 April : 1.81 19.25 9.4 May ; .96 23.05 4.2 June ; 1.28 26.30 4.9 July 2.40 28.35 8.5 August : 3.68 32.60 11.3 September 5.74 33.71 17.0 October 3.42 38.83 8.8 November 6.86 57.30 12.0 December 7.19 46.74 15.4

1975: January : 6.60 40.15 16.4 February : 7.28 36.07 20.2 March : 6.62 28.52 23.2 April : 6.21 26.07 23.8 May : 6.90 19.27 35.8 June : 4.43 15.96 27.8 July : 5.16 19.89 25.9 August : 2.24 21.11 10.6 September : 3.08 17.36 17.7 October : 1.36 15.45 8.8 November : 1.09 15.03 7.3 December : 2.11 14.80 14.3

1976: January : 3.03 15.42 19.6 February : 2.56 15.04 17.0 March : 3.90 16.27 24.0

April : 3.11 15.58 20.0 May : 3.19 15.25 20.9 Source: Table 22.

45

to 4 cents, close to the normal differential during the sixties and 2 to 3 cents less than the differential for eastern cane. The pricing pattern for Pacific cane reflects the pricing pattern for beet sugar. Western cane competes directly with beet sugar and cannot follow the same course as the world market or eastern refiners because of the pressure from beet sugar.

In Chicago-West, the price differential for beet sugar was about normal at 2 to 2.5 cents more than the New York spot price through April 1974, then it increased to around 4 cents from May to July and retreated to lower levels from August through November. As prices started down in November 1974, the differential jumped to more than 9 cents per pound and has since declined to very low levels of 2 to 3 cents.

Several general conclusions can be made. Firsts poor beet crop prospects were a significant factor in rising sugar prices in the spring of 1974. Second, competitive pressure from beet sugar dampened the increase in the price of cane sugar in the Pacific Coast area, but western sugar prices were pulled up by eastern prices throughout the 1974 period of rising prices. Third, rising beet sugar inventories, despite a smaller crop, plus a desire to improve beet sugar's share of sales contributed significantly to the break in sugar prices in November 1974. Fourth, the competitive pressure of beet sugar resulted in a break in relative prices of beet and cane sugar in Chicago-West and an increase in beet sugar's share of sales (table 25). But the competitive pressure did not result in a break in cane sugar prices in eastern areas because of institutional rigidities imposed by contracts of eastern refineries with raw mills. Fifth, current pricing policies allow for flexibility on the part of the western beet and Hawaiian cane industry through price competition. This insures movement of all sugar output, although eastern refineries have only limited price flexibility through their willingness to adjust margins and therefore must act as residual claimants to markets not filled by western sugar. On a relative basis the sugar industry appears to have operated in a competitive manner, given the constraints imposed by the U.S. Sug^r Act and contrâcting procedures. There is strong competition between beet and Hawaiian cane sugar in the West and between western beet and cane sugar in the Chicago-West.

Some degree of market behavior consistent with a highly concentrated or oligopolistic industry is suggested by the maintenance of the basing point pricing system, which results in high sugar prices in the InterTHountain- Northwest and Northeast regions, relative to Chicago-West, and by the use of Chicago-West as the residual market for sugar. Given the nature of a more elastic demand in Chicago-West area because of a large concentration of major industrial users and a relatively less elastic demand in the Intermountain- Northwest and Northeast regions, this market behavior would be consistent with discriminatory pricing in which a firm can maximize returns by differentiating between markets.

Retail Prices

The Bureau of Labor Statistics reports retail sugar prices in major U.S. cities. During the 12-month period from December 1973 to November 1974, retail prices on the average were closely related to the New York spot price

46

Table 25—Primary distribution of beet and cane sugar in Illinois

Period ; Total sugar ] Beet sugar '. Cane sugar ! Beet sugar! Cane sugar

^1^ .000 Hundredweight ._• -, Percent 1973: : January : 1,302,1 653.2 648.9 50.2 49.8 February : 1,458.3 920.1 538.2 63.1 36.9 March : 2,487.9 1,733.2 754.7 69.7 30.3 April : 1,848,6 1,246.8 601.8 67.4 32.6 May : 1,995.7 1,442.1 553,6 72.3 27.7 June : 2,429.6 1,701.2 728,4 70.0 30.0 July : 1,651.9 1,050.3 601.6 63.6 36.4 August : 2,202.4 1,456.9 745.5 66.2 33.8 September : 2,285,1 1,245.4 1,039.7 54.5 45.5 October : 2,159.8 1,373.0 786.8 63.6 36.4 November : 1,970.3 1,212.7 757.6 61.5 38.5 December : 2,125.9 1.427.1 698.8 67.1 32.9

1974: : January 2,014.5 1,106.2 908.3 54.9 45.1 February : 1,904.2 1,082.0 822.2 56.8 43.2 March : 2,041.9 1,020.3 1,021.6 50.0 50.0 April : 2.234.9 910.5 1,324.4 40.7 59.3 May : 2,250.7 858.8 1,391.9 38.2 61.8 June : 1,923.0 711.4 1,211.6 37.0 63.0 July : 2,113.3 942.3 1,171.0 44.6 55.4 August : 2,101.9 1,059.6 1,042.3 50.4 49.6 September : 2,074.7 1,243.9 830.8 60.0 40.0

October : 2,598.3 1,381.8 1,216.5 53.2 46.8 November ; 1,999,3 1,088.9 910.4 54.5 45.5 December 1,425.0 894.9 530.1 62.8 37.2

1975: January 1,278.4 757.8 520.6 59.3 40.7 February 1,196.7 673.3 523.4 56.3 43.7 March 1,378.7 845.0 533.7 61.3 38.7 April 1,677,3 1,085.8 591.5 64.7 35.3

May 1,624,1 1,080.0 544.1 66.5 33.5

June 1,807.8 1,170.3 637.5 64.7 35.3

July : 2,143.7 1,465.0 678.7 68.3 31.7

August : 2,067.6 1,325.3 742.3 64.1 35.9

September : 1.897.7 1,178.7 719.0 62.1 37.9

October : 1,847.3 1,121.1 726.2 60.7 39.3

November : 1,519.0 920.7 598.3 60.6 39.4

December : 1,559.7 948.4 611.3 60.8 39.2

1976: January : 1,685.8 1,206.7 479.1 71.6 28.4 February : 1,672.3 1,171.1 501.2 70.0 30.0

March : 2,103.6 1,517.6 586.0 72.1 27.9

April : 1,970.2 1,415,8 554.4 71.9 28.1

Total : 76,029,2 45,645.2 30,384.0 60.0 40.0

Source: Sugar Reports, ASCS; Sugar Market News> ÁMS; and gugat and Sweetener Report, AMS and ERS.

47

for the previous month plus 4.7 cents for the retailers' margin (fig. 5). 7/ The peak monthly average retail price of 62.8 cents per pound in December was 9.6 percent above the peak average New York spot price of 57.3 cents in November. Since November 1974, the margin between the two prices widened, reflecting downward price rigidity at the retail level. To some degree this represented an attempt by retailers to cover their investment in the refined product despite a falling market. This wider margin (14.6 cents) observed in 1975 gradually fell to 9-10 cents per pound in the first 5 months of 1976, about twice the historic level before 1974.

U.S. RETAIL AND RAW SUGAR PRICES

4 PER LB, —

60

40

20 —

Retail price, lagged 1 month

J i L I I L J I I 1973 1974 1975

Figure 5

_7/ Retail prices lagged slightly behind the New York spot price and reflec- ted the same pattern) during the period of the price rise. The average linear relationship between the raw and retail was as follows:

Y^ = 4.70 + LOA^^^X

t

^t-1 t

t-1 2

y.x

37.9 .99 1.18

Monthly average U.S. retail sugar price. Average U.S. raw sugar price, duty paid at New York. l5...,12; monthly data from January to December 1974, Significant at the 1 percent level of probability.

The slope of this equation indicates that changes in retail prices followed changes in the New York spot price on almost a one-to-one basis after a 1- month lag.

48

PRICE ANALYSIS

In the previous section the close relationships of world and domestic sugar prices were discussed. With no sugar program, a major force affecting U.S. sugar prices is the world price of sugar. This was also true under the U.S. Sugar Act whenever world prices rose above domestic prices, as in 1974. In this section, the underlying factors resulting in pressure on world and domestic sugar prices are examined, especially with reference to 1974.

The World Production-Consumption Balance

During the past 20 years, world consumption of sugar increased at the rate of about 2 million metric tons per year (table 26). World production increased by about the same amount, but production increases followed a more erratic pattern. Since 1970/71, world production of sugar has averaged 76 million metric tons, but world consumption has averaged 77.5 million metric tons. Consequently, world stocks have declined by about 1.5 million metric tons per year.

Trends of this type are not particularly unusual for the world sugar economy (fig. 6). Consumption exceeded production on four occasions in the past 20 years, following a pattern closely related to the 7- to 10-year sugar production cycle. On three of these occasions, sugar stocks fell below the level considered normal—about 25 percent of consumption—and prices rose sharply on the world market. Since 1973/74 beginning stocks have been less than 20 percent of consumption, the lowest levels recorded since late in the fifties.

In its recent "Staff Report on Sugar Prices," the Council on Wage and Price Stability compared the price behavior in 1974 with the behavior of prices during the two preceding world sugar price rises. Some of their data and ideas are used in this report, with a few minor changes.

Total world sugar production plus beginning stocks in table 26 is an estimate of the shortrun supply of sugar available for sale during a given season. Estimated world consumption, based on the average rate of increase in consumption plus 25 percent of estimated consumption to cover normal stocks, provides an estimate of requirements. The difference between the shortrun supply of sugar available for sale and the estimated requirements yields a positive or negative figure, depending on whether sugar was relatively abundant or scarce during a particular season (table 27). Practically speaking, these figures reflect the pressure on the world price of sugar. They provide a basis for roughly analyzing and comparing the three most recent periods of rising prices. They will be termed price pressure indicators (PPI) in this study. ((PPI = (Beginning world stocks + Production) - (1.25 times estimated world consumption))

49

WORLD SUGAR Production, Gonsumption, Price

RAW VALUE IMIL. METRIC TONS)- "0 PER LB.

75 —

50

25

Consumption fi ,

Production*

-^ \ Deflated / price /

V -

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 11 1

15

10

— 5

* PreUminary data for 1975/76.

Stocl<s as a Percent of Consumption

40

77/78

Table 26—World production, consumption, and stocks of silgar

Year l/

Production

Total :Change from : previous ; year

Consuiigtion

Total Change from previous

year

Ending stocks

Total

_ 21^ Ending t Beginning Change from: stocks as a : stocks as a previous :percentage of:percentage of year ; consumption ; consumption

1953/5»+ 195V55

1955/56 1956/57 1957/58

1958/59 1959/60 1960/61 1961/62 1963/63

1963/6!+ 196V65 1965/66 1966/67 1967/68

1968/69 1969/70 1970/71 1971/78 1972/73

1973/7»* 197V75 1975/76 2/

38,37U 38,281+

39,282 1(2,366 1+5,178

50,891+ 1+8,919 5lt,559 51,79»+ 1+9,765

5»+, 358 65,832 62,861+ 61+,570 66,232

67,620 71,895 70,521+ 70,596 75,322

80,356 78,200 81,300

1.000 metric tons., raw value

-90

+998 +3,081+ +2,812

+5,716 -1,975 +5,61+0 -2,765 -2,029

+»+,593 +11,1+7»+

-2,968 +1,706 +1,662

+1,388 +»+,275 -1,371

+72 +l+,726

+5,03»+ -2,156 +3,100

37,117 38,270

1+0,267 1+2,13»+ »+3,735

»+5,900 1+8,200 50,500 52,361 53,862

+1,153

+1,997 +1,867 +1,601

+2,165 +2,300 42,300 +1,861 +1,501

7,991 8,005

7,020 7,252 8,695

13,689 l»+,»+08 I8,»t67 17,900 13,803

+11+

-985 +232

+1,1+1+3

+»+,99»+ +719

+i+,059 -567

-»+,097

55,800 58,800 61,000 63,300 65,876

+1,938 +3,000 42,200 +2,300 +2,576

12,361 19,393 21,257 22,527 22,883

-l,l+»42 +7,032 +1,861+ +1,270

+356

68,511 70,811+ 72,785 7»+,868 76,885

+2,635 +2,303 +1,971 +2,083 +2,017

21,992 23,073 20,812 l6,5»+0 ll+,977

-891 +1,081 -2,261 -l+,272 -1,563

79,500 80,000 80,800

+2,615 +500 +800

15,833 l»+,033 l»+,533

+856 -1,800

+500

Percent

21.53 20.92

17.1+3 17.21 19.88

29.82 29.89 36.57 3»+. 18 25.63

22.15 32.98 3»+. 85 35.59 3»+.7l+

32.10 32.58 28.59 22.09 19.1+8

19.92 17.5»+ 17.99

20.88

19.88 16.66 16.58

18.9»+ 28.I+Ó 28.53 35.27 33.23

2l+.7»+ 21.02 31.79 33.58 3»+. 20

33. »+0 31.06 31.70 27.80 21.51

18.81+ 19.79 17.37

1/ Entire crop included for all harvests started during the May 1 to April 30 crop year, regardless of when harvest was completed. 2/ Preliminary data.

Source: FAS..

The 1956/57 Price Rise

Figure 7 presents the relationship between the price pressure indicator and the deflated world price of sugar for a period relevant to the 1957 price rise. _8/

In 1954/55, the shortrun supply of sugar was 1.6 million metric tons less than the sum of projected consumption plus the 25-percent inventory requirement (table 27). Thus, the price pressure indicator equaled -1.6, indicating that there was pressure on the world supply of sugar and consequently on price. However, there was no immediate price increase. Instead, the average world price remained almost constant in 1955. Consumption stayed above production, and the price pressure indicator declined to -3.2 in 1955/56. A very slight price increase followed in 1956, and the price pressure indicator again decreased, this time to -3.7 in 1956/57. In 1957, prices finally broke sharply upward, increasing by about 43 percent. A reversal of the production-consumption squeeze followed in 1958/59, and the shortrun supply of sugar increased more than 7 million tons. Average deflated world price dropped below its previous minimum, and the price pressure indicator turned positive. Prices fell slightly lower in 1959/60, and the world sugar stocks increased by 5 million metric tons. World sugar stocks increased for the next several years without causing any large decrease in the deflated price, probably because at this very low level the price of sugar is relatively insensitive to further increases in stocks.

The 1962/63 Price Rise

The world price increase that occurred in 1962 and 1963 followed an almost identical pattern (fig. 7), except that changes were of greater magnitude than during the previous rise. Starting in 1960/61, production exceeded consumption by 5.5 million metric tons, and the deflated price of raw sugar averaged 3 cents per pound. The production-consumption balance changed in 1961/62, and stocks decreased but still remained above their normal level. Instead of increasing, prices decreased by a small amount. This pattern was repeated the following year, and the price pressure indicator fell from 4.2 to -1.1, reflecting falling stocks and increasing upward pressure on prices. Stocks continued to fall in 1963/64, and prices increased dramatically. The deflated average raw price rose to 10.8 cents per pound in December 1963. World prices remained high in 1964/65, and production increased by 11.4 million metric tons, resulting in a 7-million-metrie-ton increase in stocks. During the next few seasons, the stock level continued to increase, and prices fell below 2 cents per pound, their lowest level for the data period.

The 1972-74 Price Rise

A similar pattern occurred before the 1972-74 price increase (fig. 7). For 2 years, the price pressure indicator fell with almost no price response.

_8/ The price pressure indicator is on a May 1 to April 30 year and the deflated world price is on a calendar year, causing a minor time discrepancy.

52

RELATIONSHIP BETWEEN THE PRICE PRESSURE INDICATOR AND THE DEFLATED WORLD PRICE

1956/57 Price rise

10

-4 +2

1962/63 Price rise

'63/64

's \

- '64/65

1

N \.

\ ̂ 60/61

'65/66 1

'62/63

1 1

'61/62

1 +4 +6

1972/74 Price rise DEFLATED WORLD PRICE [Ç PER LB.»

15

ylt74/75

/'75/76 N.

10

^^0 î> '73/74 5 '72/73 <C

ill 1

^^^ '70/71 '69/70

n

'71/72

1 1 1 1 1 -4 -2 0 +2

PRICE PRESSURE INDICATOR

+4 +6

Figure 7

53

World sugar production was below normal in 1970/71 ^ndl971/72v and prices finally started to increase. Production increased somewhat in 1973/745 then fell: almost a million metric tons in 1974/75• The price preissure indicator increased to -4.7, its highest level during the 1954/74 period, and world prices exploded upward.

Table 27--World shortrun supply, consunçÈion trend, and normal inventory balance, and deflated price

Crop : Shortrun :Consunp t ion :Conaümption : : trend : Price 1 Deflated

year : supply t/ trend 2/ :plus normal : pressure price 5/ : inventory 3/: indicator 4/!

Cents per —.- Million

38.3

pound

3.61 1954/55 : 46.3

UlC WI it. UWiJLö — — -

47.9 -1.6 1955/56 : 47.3 40.4 50.5 -3.2 3.56 1956/57 : 49.4 42.5 53.1 -3.7 3.69 1957/58 : 52.5 44.6 55.8 -3.3 5.28 1958/59 59.6 46.6 58.3 1.3 3.50 1959/60 : 62.6 48.7 60.9 1.7 2.92 1960/61 : 69.0 50.8 63.5 5.5 3.04 1961/62 70.3 52.9 66.1 4.2 2.78 1962/63 : 67.7 55.0 68^8 -1.1 2.82 1963/64 : 68.2 57.1 71.4 -3.2 7.93 1964/65 : 78.2 59.2 74.0 4.2 5.40 1965/66 • 82.3 61.2 76.5 ' 5.8 ; 1.91 1966/67 • 85.9 63.3 79.1 ■ 6.8 1.63 1967^68 : 88.7 65.4 81; 8 6.9 1.69 1968/69 , 90.5 67.5 84.4 6.1 1.62 1969/70 93.9 69.6 87.0 6.9 2.63 1970/71 • 93.6 71.7 89.6 4.0 2.77 Í 971772 : 91.4 73.7 92.1 -.7 3.19 1972/73 : 91.8 75.8 94.8 -3V0 5.09 1973774 : 95.4 77.9 97.4 -2.0 6.24 1974/75 : 94.0 80.0 100.0 -6.0 17.66 1975/76 ! 95.3 82.1 102.6 -7.3 11.10

J./ ^^g^'^'^i'^ê "World Stocks plus production, 2/ These figures ^blch are based on the changes in levels of consumption be-

tween 1954/55 and 1974/75 are meant only as a general reflection of the constimption trend under somewhat aver age conditions.

3/ The normal inventory is 25 percent of the cansumption trend. 4/ Shortrun supply minus consumption trend and normal inventory. J/jGaribbean basis price deflated by^SNP itr5>li^itiaeflató^^

54

The 1974 pattern differed from the earlier periods in two major aspects: production did not increase in response to the higher prices as it had during the previous rises, and the price increase was of a much larger magnitude* Clearly, a strong causal relationship between these two fai-tors exists. The low sugar production in 1974/75, following 3 years of deficit production and a drawdown of world stocks, placed great pressure on world prices. Tliis appears to have been the major factor causing record world prices. The fact that prices fell in 1975 and remained below the 1974 level, despite an even smaller price pressure indicator, probably resulted from the slowdown in the rate of increase in world consumption, inventory pulldown, and other adjustments which in actuality decreased pressure on prices.

Thinness of the World Free Market

Adequate sugar supplies were not available when the world's major importers turned to the free market for supplies in 1974 because of production shortfalls and low inventories. Competition among the importers, many of whom are relatively price insensitive, caused prices to explode. 9^/

The quantity of sugar available on the world free market amounts to 12 to 15 percent of total world consumption (table 28). This is about 2 to 2.5 times the size of total U.S. imports, and it represents about half of the total world exports. In effect, 70 to 75 percent of the world's sugar is consumed in the producing country and not exported. This free market volume has been increasing in recent years, both absolutely and relative to U.S. imports, world exports, and total world production.

The volume of sugar traded on the free market probably precludes effective manipulation by any individual interest group. But since it is relatively thin and it includes uncommitted sugar, the volume of sugar is sensitive to competitive pressures and subject to explosive price changes during a shortage. Trading a larger proportion of world sugar production on the free market would provide a greater assurance that the free market price reflects basic world economic conditions.

U.S. imports have accounted for about a fifth of total world exports in recent years, and imports have supplied about 47 to 48 percent of total U.S. consumption. When the U.S. Sugar Act was in effect, U.S. prices were insulated from the world price, except during periods of shortages which forced th;e world price above the U.S. price. This situation had the tendency to put pressure on the U.S. prices. Even then, it was not always necessary for the U.S. price to increase as much as the world price, since exporters would normally sell sugar to the United States at a temporarily lower price to maintain their quota. Maintaining their quota would usually guarantee the exporter a higher price, if not immediately, at least in the future. This, of course, directly affected the world price since it involved sugar that would have otherwise been traded on the world market. But in 1974, at least some exporters may have reacted in the opposite fashion. Instead of increasing the

9^/ According to one 1971 estimate, the price elasticity of demand for all sugar in the United States was -0.21, based on 1955-65 data (George).

55

Table 28--Free market volume as a percentage of U.S. centrifugal sugar imports, total world centrifugal sugar exports, and U.S. and world sugar consunçtion XI

Item 1965-69 average

\ \<il\ ! 1972 : 1973 i 1974

Million; metric tons

Free market volume U.S. Imports World exports U.S. consumption World consumption 3/

: 2/8!5 : 4.1

19.2 2/9.5

: 67.1

9.4 4.8

21.5 10.2 74.9

11.1 5.0

21.7 10.6 76.9

11.8 4.8 22.3 10.6 79.5

10.6 5.3

21.7 10.3 80.0

Free market volume as a Percent

percentage of-- World exports U S. consumption World consumption

; 44 : 89

13

44 92 13

51 105 14

53 111 15

49 103 13

U.S. imports as a percentage o£ vorld exports ! 21 22 23 22 24

\l Free market as defined by the International Sugar Agreement of 1968, volume based on total net free market imports.

II 1966-69 average. 3/ Crop-year basis.

Source: Statistical Bulletin, International Sugar Org. 1976, and Foreign Agriculture Circular, PAS,

January

amount of sugar they supplied to the united States, as was usually the case when the U.S. quota was increased, exporters tended to sell their sugar on the higher priced world market. Even though actual foreign quota marketings in the United States increased each month in 1974, the rate of increase slowed after the defeat of the U.S. Sugar Act on June 5.

With no U.S. Sugar Act, the U.S. ^nd world market prices should be very closely related. Since the end of both the U.S. Sugar Act and the ^Commonwealth Sugar Agreement, the world free market broadened considerably. With a larger base, future world price fluctuations should be tempered, and U.S. prices will show more variation assuming U.S. policy does not change from the current situation.

Supply Factors

Sugar Production in 1973/74

Despite record world sugar production, many production events in 1973/74 contributed to increased prices. On November 30, 1973, the Foreign

56

Agriculture Service^s estimate of world sugar production was 82.3 million metric tons. Because of poor weather, this estimate was reduced to 81.7 million metric tons in December 1973, and recent figures indicate that actual production in 1973/74 was 80.4 million metric tons (app. table 18).

Weather conditions cut yields in various parts of the world. Production decreased in the United States, Italy, Poland, South Africa, and Australia. The reduced production in Poland occurred after several years of increased production and despite expanded acreage in 1973/74.

U.S. production totaled 5.4 million metric tons in 1973/74, 11 percent below 1972/73. Production in all areas except Puerto Rico decreased. Sugar beet acreage was lower because of high prices for competing crops, such as wheat, and yields were poor. The U. S. cane harvest was also smaller, mainly because of low rainfall in Louisiana during the early part of the growing season and because of freezes in December that reduced the Florida crop.

After three poor crops since 1970/71, the U.S.S.R. produced a record crop in 1973/74. Despite the increased output, consumption was an estimated 1.7 million tons above production, again resulting in large Russian imports mainly from Cuba.

Although world production was high in 1973/74, production generally was disappointing in many parts of the world, particularly in the developed countries. As a result, stocks remained tight in the face of increasing consumption, and pressure on available supplies of free market sugar became intense.

Production Shortfalls in 1974/75

The outlook for the 1974/75 sugar crop was particularly bleak by the fall of 1974. West European producers were hard hit by cold, damp weather early in the growing season and again during harvest. The United Kingdom's crop, cut by the disease virus yellows, was an estimated one-third smaller.

Although sugar beet acreage was up slightly in the U.S.S.R., it was estimated that cold rainy weather early in the growing season and again during harvest had reduced 1974/75 outturn to about 9 million tons, compared with 9.57 million in 1973/74. Even this was an optimistic estimate, since actual sugar production in the U.S.S.R. was down by more than a million tons in 1974/75, 11.2 percent below the previous season.

Weather problems also plagued Poland, and the Philippines suffered typhoon damage. Production was lowered in both areas.

The December 1974 "Foreign Agriculture Circular" stated that Cuba would likely increase production, despite some adverse weather. Revised figures indicate 1974/75 production in Cuba was 330,000 tons less than 1973/74.

U.S. production in 1974/75 was almost the same as in 1973/74, well below normal. Beet sugar production was particularly decreased, more than 550,000 tons less than 1972/73.

57

Some countries increased production in 1974/75, but the&e were exceptions• TSie season can be characterized as one of cpntiriUally declining expectations for the world sxigar crop. The, November 11^ 1974, estimate of sugar production was 81.1 million metric tons. This was revlBeiit(3 80.9 million metric tons in December, and actual production was 78.2 million metric tons, raw value basis. Each round of declining expectations during most of 1974 was accompanied by increasing prices.

Production Alternatives in the United States

One reason for lower sugar beet production in the United States in 1974 was the attractiveness of alternative crops. Sugar beets compete for acreage with other crops, at least to some degree, in all domestic areas of sugar beet production. Gottonanjd sugar beets compete for the same acreage in the central valley of California, and grain and sugar beets compete for irrigated acreage in th Northern Great Plains and Northwest. Sugar beet acreage tenis to decline when farm prices for alternative crops are high as in 19 73 and 1974 and when the profits for these crops appear more favorable than for sugar beets. On the Other hand, low prices for alternative crops cause sugar beet aGreagei to increase. Principally because of the price objective in the expired Sugar Act, prices paid for sugar beets over the years have been genarally stable and fairly attractive. Consequently, sugar beets have been long considered a good cash crop.

The 1974 sugar beet crop in Idaho, Washington, and Oregon area is a good example of how high prices for competing crops can drastically reduce sugar beet âGreage. Principally because farm prices for grain and vegetables appeared considerably more attractive than for sugar beets early in 1974, total sugar beet acreage decreased from 270,000 acres in 1973 to 170,000 in 1974, or 37 percent less.

Sruga^ that Cost of Living Council regulations resulted in poor returns in 1973, which made other crops seem better alternatives for the 1974 season. Processor prices were constrained by the Cost of Living Council, and under normal joint participation contracts sugar beet grc^ers did not receive the higher prices in 1973 they might have otherwise received with a short crop.

Hiatorically and for other reasons, alternative crops offer only limited Gpmpetition in those areas in the United States where sugar cane is growTi. Soybeans and cotton in Louisiana, beef cattle and vegetables in Florida, and cotton and sorghum in Texas are alternatives farmers consider.

Availability of Substitutes

Several caloric and one noncaloric sweetenersv^hose in 1974 may 1>e substituted for aligar in varying degrees .Thèse include the corn sweeteners, honey, other edible sirups, and saccharin. ^

Corn sweeteners are considered the ma^qr substitute for sugar, and with high sugar prices their use will increase markedly in the future. There are

58

essentially three corn sweeteners—corn sirup, dextrose, and new high-fructose corn sirup.

High^fructose corn sirup has been available in coranercial quantities only since 1971. It can be used in any product in which moisture is desirable. These uses include soft drinks, bakery products, canned fruit, frozen strawberries, preserves, and ice cream. Some trade sources believe that about half of the current industrial market for sugar will eventually be replaced by high-fructose corn sirup. Certainly the corn sweetener industry has and will be providing strong competition to the U.S. sugar industry.

Lack of production capacity, which was a problem in the wet milling industry in 1974 and 1975, no longer appears to be a problem. Industrial users are no longer allocated supplies (company rationing) based on history of sales. Corn wet millers who manufacture high-fructose corn syrup now have the capacity to meet the year—round demands of industrial users. Several new plants are expected to be completed by 1977.

Saccharin is not generally viewed as a substitute for sugar, but rather as additional sweetener consumption. About a fifth to a third of saccharin consumption has replaced sugar, with the rest as added consumption. Thus, even though saccharin is considered a substitute for sugar, it is only a partial substitute. Most of its use has been for diet soft drinks, dry beverage mixes, canned fruits, and table uses.

Demand Factors

World Consumption Trends and Characteristics

The world consumption of sugar has increased rapidly during the last few years, mainly because of consistent increases in world population and rising incomes in the developing areas of the world (table 29). Per capita consump- tion varies considerably between the high- and low-income countries (app. table 19). Development in the poorer countries is accompanied by a rapid increase in sugar consumption. Data on per capita consumption of sugar in selected countries, along with FAO estimates of income elasticities for sugar, are presented in table 30. The elasticity figures represent the percentage increase in sugar consumption for each 1-percent increase in the country's average per capita income. Considering the large concentration of population in low-income countries, these figures imply a large increase in the demand for sugar in the future as these countries develop and their populations con- tinue to grow. In general, the less-developed countries have the high income elasticities; developed countries have positive but very low income elasticities.

The income elasticity of sugar is rather low in the United States. According to one study, it consists of three major parts, with varying levels depending on use. These uses and the relative elasticities are as follows: consumer package use, -0.20 to -0.35; use in prepared foods, +0.20 to +0.30; and use in beverages, +0.40 to +0.50» Rising consumption of sugar in soft drinks and prepared foods has offset the decline of consumer package use over

59

the years. Advertising and sales promotion of such sugar-containing products as soft drinks has also benefited the sugar industry.

Table 29--Per capita world sugar consumption

statistical : World sugar • : World : World per capita crop consumption : human : consumption

year 1/ ! (raw value) : population 2/ : (raw value) Million tons Millions Pounds

1953/54 37,177 2,676 30.58 1954/55 38,270 2,722 31.00 1955/56 : 40,267 2,772 32.09 1956/57 42,134 2,823 32.90 1957/58 43,735 2,875 33.54 1958/59 45,900 2,929 34.55 1959/60 48,200 2,986 35.59 1960/61 50,500 3,044 36.57 1961/62 52,361 3,103 37.20 1962/63 53,862 3,163 37.54 1963/64 55,800 3,225 38.14 1964/65 58,800 3,288 39.43 1965/66 ; 61,000 3,350 40.14 1966/67 : 63,300 3,414 40.88 1967/68 : 65,876 3,478 41.76 1968/69 : 68,511 3,543 42.63 1969/70 : 70,814 3,610 43.25 1970/71 : 72,785 3,678 43.63 1971/72 : 74,868 3,767 44.05 1972/73 : 76,885 3,818 44.40 1973/74 : 79,500 3,890 45.06 1974/75 : 80,000 3,967 44.46 1975/76 : 80,000 4,044 44.05

1/ Commencing Sept. 1 and ending Aug. 31^ 2/ Mid year population, based on united Nations estimates.

Policies (Actions) of Various Governments

The actions of various governments tended to amplify the price rise of 1974. The United States added to the general confusion about sugar prices by ending the Sugar Act and by a series of announcements of supply deficits and quota increases. Some of these quota increases have been criticized as larger than necessary.

The Council on Wage and Price Stability summarized the results of a survey carried out by a Fren^ trading company (Compagnie Financière Sucres et Denrées) which compared retail sugar prices in 98 countries in April-July 1974

60

to those of the previous year, 10/ Results indicate that most exporting countries were slow to pass on increases in world sugar prices to their consumers. Rather, according to the Council, they adopted policies which tended to support domestic consumption.

Table 30--Per capita sugar consumption and estimated income elasticities for selected areas.

Area Per capita consumption in-

1969 1972 1974

Estimated income

elasticity

Brazil 82.7

uuus, LCLW vaj.

92.2 93.7 India 13.0 15.4 14.3 Zaire 5.1 6.8 7.3 Japan 56.4 67.0 67.0 European Community 91.3 90.2 100.3 U.S. mainland 106.9 110.9 106.9 U.S.S.R. 90.6 95.7 98.3

1/ 1.03 1.60 .39 .31 .10 .21

1/ Not available. Source: International Sugar Org., Sugar Yearbook 1974, and FAG.

The Council also placed the 61 importing countries covered in the survey into two general groups on the basis of their sugar policies. One group includes countries which completely insulated their domestic retail price of sugar from the free market price (representing nearly two-thirds of the total consumption of importing countries)*

The other group includes countries which, to some extent, permitted their domestic retail price to increase with the free market price (representing slightly more than a third of the total consumption of importing countries).

Most centrally planned and European countries were included in the first group. Many countries in the second group also dampened the price increase to their consumers. Policies encouraging a high rate of consumption in the face of short world supplies obviously have the effect of increasing free market prices.

The Council also considered whether the USSR and the Middle East nations colluded to increase sugar prices in 1974 and reached the following conclusion:

10/ Council on Wage and Price Stability, "Staff Report on Sugar Prices," Office of Wage arid Price Monitoring, May 1975, pp. 23-29.

61

"The Soviet Union and the Mid-East nations did purehas sizeable quantities of sugar during the lattefi part of 1974. But their purchases appear to have been çonsisteitt with their rising needs and financial means and, therefore, did not represent hoarding." 11/

In any event, during the scramble for th^ short supplies of sugar in the last half of 1974, rumors of substantial purchases and of withhold^ of sup^plies by exporters coTitributed to paychological pressures that tended to amplify the price increase. There is some evidence of withholding of sugar supplies by exporters in the fall of 1974. For example, on September 1, 1974, Philip>pine ending sugar stocks were 559,00Í) short tons^ compared with 1Í4 tons on Seiptember 1, 1973. This is about 500,000 tons of sugar the Philippines could have sent to the United States in the last quarter of 1974 but did not. If the U.S. Sugar Act had been extended another 3 to 5 years, some of the 500,000 tons of sugar likely would have been sent to the U.S. market.

Actions by the Arab Countries

During 1975, rumors of unusually heavy buying were attributed to Russia, Japan, Canada, and the Arab nations. The Arab nations received the most publicity. The sugar trade reported that the Arab nations started buying silgar heavily in the world market early in 1974, and by midyear they had purchased over 3 million tons and were continuing to place large orders. The Rees' Commit tee Report stated that '*Mid-East nations were persistent buyers despite rapidly rising jxrices, and coneentrated their purchases in the fall of the year," but it pointed out that this is a traditionally heavy sugar-buying time for these countries, as well as many others. 12/

Only Iran, Egypt, and Morocco produce significant amounts of sugar, and none of the Middle East countries are self-sufficient in sugar production* The per capita consumption of sugar iii some oß these countries has been increasing rapidly. For example, PersianMSulf per capita consumption in^creased by more than 280 percent between 1560 and 1974, and Syrians per capita consumption increased 69 percent between 1966 aiid 1974 (table 31). Also, the record oil prices have increased the willingness i^f some of these countries to pay high prices for sugar. For these reftsons, some trade sources have held that buying by the "oil-^rich" nations ^as not exoessive in 1974. Other trade sources have held that the Arabs were purchasing more sugar than they could use and were speculating.. Purchases of refined sugar by Syria, Iran, and other purchases by Morocco, Libya, and Somalia were quoted as examples of above normal purchases.

Sugar supply and distribution data for 1973 and 1974 indiGate that several Middle East countries increased sugar stocks in 1974 (tables 32 and 33). Saudi Arabia started ^th a relatively large si:ook of sugar ^reduced imports, and depleted stocks through consumption. Syria imported a iittle more sugar than was consumed in the country, resulting iti stocks: that were 23,400 metric

11/ Ibid., p. 61. 12/ Council on Wage and Price Stability, op. cit., p. 61,

62

Table 31--Per capita consutnption of centrifugal sugar in the Middle East

Country or region : 1960 ': 1962 : 1964 ': 1966 ': 1968 , 1970 ': 1972 : 1973 : 1974

Kilograms, raw value

Egypt, Arab Republic of Iran Iraq Persian Gulf Saudi Arabia Syrian Arab Republic Southern Yemen Republic Kuwait

14.0 . 20.6

15.3 18.9

16.6 23.8

18.3 22.6

15.7 24.1

15.6 24.7

16.6 28.5

17.0 28.8

17.0 27.5,

. 28.8 : 10.6 : 7.3 : NA : NA : 27.0

33.1 15.0 9.1

NA NA 29.4

26.5 16.9 6.8

NA NA 29.1

31.3 20.6 8.4 18.3 31.0 31.8

34.4 29.1 9.6

17.6 43.7 34.6

33.4 36.4 11.6 22.4 26.4 34.7

32.3 37.8 15.9 27.0 26.5 36.8

33.6 37.8 13.4 29.0 26.9 36.5

37.1 40.3 13.7 30.9 24.5 37.4

TriTflaTi : 22.9 32.4 20.4 27.9 31.6 33.0 34.1 19.4 19.1

Libya : 22.2 20.7 19.2 26.8 32.2 34.0 36.0 39.4 42.4

World average ': 16.5 17.2 17.4 18.3 19.1 19.9 20.4 20.7 20.3

1/ NA =? Not available.

Source: International Sugar Org>>Sug;ar Yearbook 1974 and earlier.

Table 32--Sugar supply and distribution for 11 Middle east countries, 1973

ON

Country : Beginning Total;

supply"

: Ending ; Ending stocks or : stocks •Production Imports Consumption Exports irstocks on; as percentage

region : on Jan. 1 : xjn : of consunnption . Dec. 31

1 nr\r\ —.^*-.^s. raw value

3 280.0

Percent

11.2 Algeria : 37.8 25.0 248.5 511,: 0 31.3 Egypt, Arab Rep, : 64.5 5M.9 61.7 698.1 600.8 42.2 55.1 9.2 Iran : 86.7 650.0 302.8 1,039.5 900.0 0 139.5 15.5 Iraq : 61.5 20.0 473.7 555.2 350.0 0 205.2 58.6 Jordan : 48.1 0 20.0 68.1 50.0 0 18.1 36.2 Kuwait : 13.1 0 25.0 38.1 32.1 4.4 1.6 5.0 Libya : 20.9 0 93.9 114.8 85.0 0 29.8 35.1 Morocco : 105.6 230.1 283.1 618.8 480.0 20.0 118.8 24.8 Saudi Arabia : 48.9 0 163.0 211.9 114.1 0 97.8 85.7 Syrian, Arab Rep. : 110.1 18.1 202.6 330.8 200.0 0 130.8 65.4 Tunisia 27.7 4.5 114.4 146.6 130.0 0 16.6 12.8

Total : 624.9 1,519.6 2,018.7 4,163. L 3,222.0 66.6 874.4 27.1

Source: International Sugar Org., Statistical Bulletin, Dec. 1975.

Table 33--Sugar supply and distribution for 11 Middle East countries, 1974, and comparison with 1973

Ln

1/ NA = not available.

Source: International Sugar Org, Statistical Bulletin, Dec, 1975.

Country 1Beginning ! Ending : Endlne stocks or

region [stocks on] |Jan. 1

Production- : Imports • Total, supply.

Consumption, .Exports • stocks on [Dec. 31st

; as : of

percentage consumption

— — 1 f\r\f\ metric tons - raw N _ 1 „ _

li — 1,000 TSLlue ïrcent

Algeria i 61.3 25.0 408.3 494.6 330.0 0 164.6 49*9 Egypt, Arab Rep. : 55.0 534.0 103.0 692.0 637.4 0 54.6 8.6 Iran :139.5 523.8 608.0 1,271.3 886.9 0 384.4 43.3 Iraq :205.2 20.0 392.4 617.6 400.0 0 217.6 54.4 Jordan : 18.1 0 50.8 68.9 50.9 0 18.0 35.4 Kuwait : 1.5 0 53.0 54.! » 34.0 10.0 10.5 30.9 Libya . 29.9 0 92.2 122.] 95.0 0 27.1 28.5 Morocco :118.8 260.0 286.6 665.4 480.0 10.0 175.4 36.5 Saudi Arabia . 97.8 0 66.3 164.] 120.0 0 44.1 36.7 Syrian, Arab Rep. :130.7 18.0 225.5 374*2 : 220.0 0 154.2 70.1 Tunisia 16.6 4.4 140.6 161. É > 138.1 0 23.5 17.0

Total in 1974 874.4 1,385.2 2,426.7 4,686.2 1 3,392.3 20.0 1,274.0 37.6

Total in 1973 624.9 1,519.6 2,018.7 4,163.1 3,222.0 66.6 874.4 27.1

Difference 249.5 -134.4 +408.0 +523.2 +170.3 -46.6 +399.6 1/NA

Percentage change: +39.9 -8.8 +20.2 +12.6 +5.3 -70.0 +45.7 NA

tono larger by the end of 1974. Several eouiitries^-Âlgeria, Iraq, Libya, ana Syria^-^ijicreased cons^rmpilon substantial^^

Overall, these ch;anges occurred in: the Mîd^l^ 1974. Production decreased 9 percent, and imports increasM 20^ercent. Gon increased 5 percent, and ending stocks increased 4^ p^cent.

Each of these changes would have contrlhuiEed upward pressure on sugar prices. They reflect^reat purcáiasing power, lii^ and a strong desire to assure domestic supplies, lut little can be determined about Arab speculation from these data.

USl^ Actions

Many actions by the US M late in 1973 and in 1974 may haver placed pressure on the world market for sugar in 19^74 (^M>le 34) . Although it^ is difficult to

Table 34.—Oironology of ÜSM actions

Date Î îïature of action U.S. sugar

r^squlrements Change ; Total Short Million tons short tons

1973:

Oct. 4

Npv* 2

11

Jan¿ 11

Mar.

July 25

Sept. .25

Proposed 1974 consumption requirements —. 11.7

Determined 1974 consumption requirements +100,000 11.8

1974 consumption requirements increased +200^,000 12.0

1974 consumption requirements further increased (first-come, first-served) J^/

Siopply deficits declared

More supply deficits declared

High supply deficits declared 2/

+500,000 12.5

+141,762 12.5

+104,^589 12,5

+600,000 12.5

\J Various parties questioned these actions. For example, in February 1974, the "National Food Situation" stated th^t tJie 12.5 taillion^^t^ requirement ". ..would seem to be 800 thousand tionsMgher than t^ needed foT^ actual consmpt^ion^

2/ This action followed a September 1974^rediction by F^O. Licht of deficit world consumption in 1974/75.

66

quantify the impact of these actions, the 500,000-ton increase in U.S. requirements announced in January 1974 came early in the rise in world prices from 11.8 to 21.3 cents per pound from December 1973 to February 1974.

Other Factors Allegedly Affecting World Sugar Prices; Fall 1973

Some reports from USBA said the Sugar Act was obsolete. This tended to undercut the incentive of foreign suppliers to supply the United States late in 1973 and early in 19 74, and it may have tended to make U.S. suppliers somewhat slower than normal in marketing their sugar.

First half of 1974

(1) No quarterly quota provision was in the Sugar Act to obtain minimum import commitments. This may have slowed deliveries early in 19 74. The provision was discontinued in 1971.

(2) Congress failed to extend the Sugar Act beyond December 31, 1974. With rising prices, supplying countries could gain by delaying sales. This tended to push up prices.

Second half of 1974

(1) The Commonwealth Agreement was terminated on December 31, 1974. With the agre^nent ending, there was little incentive for member countries to supply the United Kingdom with lower priced Agreement sugar, and contracts

were later renegotiated at higher prices.

(2) U.S. global quota program for calendar year 1975 was not announced

until November 18, 1974.

(3) Hedgers became locked in when U.S. raw sugar prices were rising rapidly from October 1 to November 20. Futures contracts frequently became undervalued, relative to the market price of sugar, because of institutional limits on daily futures price changes. This reduced trading and made it difficult to consummate cash sales. Sellers were not able to close out a previous futures hedge without losing considerable money on the cash sale.

(4) Although total U.S. sugar deliveries declined 2 percent in 1974, consumer package deliveries (less thaii 50 pounds) increased 2 percent, and sugar deliveries in large packages (50 pounds or more, which are mostly used by smaller industrial users) increased 4 percent. These gains in the face of a falloff of total deliveries in 1974 suggest stockpiling or building larger inventories than really needed because of anticipated price (see the section,

"Sugar Utilization").

67

Overview

The factors that caused the unprecedented 1974 rise in sugar prices are many and varied• Early in 1974 the major factors causing world prices to move into the 21-cent range were the long term decline in world stocks, aggresive buying by many nations, announcaiient of additional requirements under the U.S. Sugar Act.

Prices rose in the spring and summer of 1974 based on a short U.S. beet crop and declining world crop estimates. It is difficult to determine whether defeat of a new U.S. Sugar Act by the House of Representatives on June 7, 1974 had an impact on U.S. sugar prices. Two possible effects of not passing a new act during this period of effective shortages could have been (1) -a lower relative level of imports or a slowdown in imports in 1974 compared to what might have occurred if an act had been passed and (2) higher U.S. prices because foreign suppliers might have been willing to accept a quota discount on sugar needed to meet quota requirements. Based on data from table 3 the pattern of quarterly deliveries did not change much in 1975, and in fact, foreign sources supplied more than 400,000 short tons of additional sugar in 1974 compared to the 5,743,000 tons in 1973, the highest yearly imports recorded from 1960 to 1974.

With the defeat of a new Sugar Act, the quota discount of 4 to 6 cents disappeared between the world prices (New York basis) and the New York spot price, which held from January through April 1974. It was replaced by a quota premium (up to 1.29 cents per pound in July 1974) or a small quota discount (August-November 1974, 0.5 cent to 2.5 cents per pound). Thus, U.S. sugar prices may have been 3 to 4 cents higher in the last half of 1974 with no Sugar Act. Considering the probability of a higher world price under these circumstances, the difference might have been reduced to 2 to 3 cents. Failure to extend sugar legislation may have increased sugar prices slightly in the fall of 1974, but it was not a major cause of higher sugar prices.

In the fall of 1974 prices were pushed up by poor weather, rumors of heavy buying by Middle East and centrally planned nations, and hoarding by many users around the world. Late in October and early November, the futures market was near panic, and any credible rumor was worth a price jump of 2 cents. Late in November the market turned in response to buyer resistance and better world crop expectations. Since then, prices have fallen to lower levels because of a strong supply response coupled with the increased availability of substitutes, such as high-fructose corn sirup, and a downward adjustment in per capita consumption of sugar.

This study concurs with the Council*s finding that it is improbable that speculation in itself could have caused the 1974 price increase, since trading on the New York Coffee and Sugar Exchange declined in 1974, relative to 1973, and since in an open exchange speculators are free to buy or sell based on their expectations. So, daily upside and downside pressures should result in an equilibrium position between those wishing to gamble on higher prices and those wishing to sell short in expectation of lower prices.

68

PERFOEMANCE OE THE SUGAR INDUSTRY

How the sugar industry has performed over time can be measured by margins and price spreads, costs, and rates of return on shareholders' average investment. In addition, pricing performance was examined under two periods of stress to see if leadership patterns developed in the major basing point territories. January 1974 to mid-November 1974 was a period of rising prices, and mid-November 1974 through December 1975 was a period of falling prices.

Prices and Marketing Spreads (Margins)

Marketing spreads were estimated annually before 1973 and on a monthly basis after 1973 for cane and beet sugar sold at retail in five selected markets. Marketing spreads for cane sugars were estimated at the following levels of marketing activity: farm to raw cane sugar mill, raw cane sugar mill to cane sugar refinery, and refinery to distributor-retailer. Because processing sugar beets into refined sugar is a single operation, marketing spreads were estimated at: farm to sugar beet processor, and sugar beet processor to distributor-retailer.

Since 1973, margins data allow for about a 3-week lag between the retail and wholesale levels and an additional lag of approximately 1 week for processing or refining. A 7-percent loss or allowance for refining shrink is also included. Starting with 1973, annual margins data represent weighted monthly figures with weights based on regional distribution by primary distributors. In a few instances, negative spreads were caused by the rapid adjustments taking place in the industry during 1974 and 1975.

One of the main beneficiaries of high sugar prices during 1974 and 1975 was the producer. This situation usually occurs in any period of shortage for an agricultural commodity with an inelastic demand. Farm level prices of sugar generally averaged 5 to 6 cents per pound of sugar on a refined basis throughout the sixties and early in the seventies. However, grower returns more than doubled between 1973 and 1974 (tables 35 and 36). During the same period the farmer's share of the retail dollar on the average showed moderate percentage increases.

Raw sugar processors also benefited substantially from high prices in 1974 and 1975. The estimated raw sugar mill spread increased from 4 to 4.5 cents per pound in 1973 on a refined sugar basis to 11 or 12 cents in 1974. In 1975, even though the market was declining, this spread averaged more than 10 cents. The raw sugar mill spread in both Louisiana and Florida rose substantially starting in March or April of 1974 and continued through December 1974 (app. tables 20 and 21). Raw sugar processors receive a percentage share of the market price for raw sugar.

Producers of sugarcane receive payments from the total revenue obtained from the sale of sugar and molasses. The payments are in proportion to their share of the total costs of production and processing. The producer's share has consistently averaged between 60 and 65 percent with the rest going to the processor. Before 1975, the producer's exact share was based on an annual "fair price determination" established under the Sugar Act.

69

Tablô 35--^Pricés aji4 marketing spreeLds for cane siigar sold at rötaxl

• ' 'i ' j ' . * Barm value and marke-tlng spreàas as a Prices according to source •

narKeTsing spreaas percentage of the retail price Place and

year : Farm •

Raw : : : :

Farm to • iDistributor! Farm : Raii sugar : Wholes ale rDistriTjutor : and

value sugar a Wholesale 1/j Retail jíaw sugar. Wholes ale, and j value •mill spread: spread : retailer ■ ''"'"' '' ; - |, , '• : '' ' '' 5 Bdll ; . retailer . i , î : spread

'Louisiana

mt ^.— •*^^"* Cents per pound

At Chicago, 111.: Lönisiana Chicago Chicago

l96Q^6h ! 5.2 6.9 9^3 12.0 1.7 2.h 2.7 U3.3 111.2 20.0 22.5 1965-69 5.2 7.1 9-7 12.0 1.9 2.6 2.3 Íf3.3 15.8 21.7 19.2 1971 6.0 8.2 11.7 1^.1 2.2 3.5 Z.k if2.9 15.2 2Í+,7 17.2

1973 Î 6.7 10.8 13.^ 15.^ U.l 2.6 2.0 ^3.5 26.6 16.9 13.0 1971^ : 15.5 26.6 30.2 30;6 U.l 3.6 .If 50.6 36.3 11.8 1.3 1975 : 15.7 25.9 3^.5 35.0 10.2 6.6 2.5 íf3.5 28.5 18.8 9.2

At Atlanta, Ga.: . Florida New York 2/ Atlanta Atlanta

1960-ëU f h,é 6.8 9-7 lfm 2.2 2.9 2. It m NA NA NA 1965-69 Ï 11.9 7i3 10.2 NA 2.if 2,9 NA NA NA NA NA 1971 í 5.^ 8.5 12.1 13 ^h 3.1 3.6 1*3 ifO.3 23.x 26.9 9.7 1973 í Ö.3 10.8 ïkS 15-1 »♦.5 ^'J*.0'.'"'

, .• -'^ „ ■ hi.f 29.8 ^6.5 2.0

áW t 1U.8 27.0 31.5 31.9 12.2 i^:.? .If h6.k 38.2 lii.l 1.3 1975 : 11^.7 25. í* 33.1 39.2 1Ö.8 7-6 6.1 36.7 27.1 19.5 16.8

At New ïork, N.Y.: íí^ertp Rico New, York

•, ■■■ 6.8 ■ ../■

Nei^ York J^ew York

. 2.1,7''' ■■.•.3'.:3 ■, :, , '■■ ,;,2.1''''. ■'•; .''38:.5; ' ^ 17.è, . . 27.0 1^0-61+ ;:" .h'a "' . ''17''.Ö:„.^

1965-69 : k.9 7^3 IÖ.7 1^V3 2.k 3.t' ■ 1.6 :■■ 39.8 19.5 27.7 13.0 1971 : 5.Í+ 8.5 la.é 13.9 3.1 U.l 1.3 38.8 22.5 29.2 9.5 1973 í 5.7 10.9 15.1 15.5 5.1 U.2 .If 36.8 32.9 28.1 2.6 1974 ! lii.8 26.5 30.8 31,5 01.7 U.3 .7 if7.o 37.1 13.7 2.2 1975 í NA 26,0 35.3 38-8 ;NAV:' io.it 1.7 HA NA 31.5 5.2

1/ These are offers of sugar distributors. Delivered prices may differ from these figures. 2/ Represents effective price to Savannah, Gà., refinery. 3/ NA = not available.

Table 36—Prices and marketing spreads for beet stigar sold at retail

' Prices according to source Marketing spreads : Farm value and marketing spreads ; as a percentage of retail price

Place and year 'Distributors : ■ :] Distributors ! Farm ; "Wholesale l/ • Retail Wholesale' and : Farm :Wholesale: and ; value !

; retailers ■

; value : spread : retailers spread

--.__...^^.. Pian'f'.g ru3T* nrvilr irl Percent

At Chicago, 111.: ! ! Central Chicago Chicago

I96O-6H ! 1^.9 9.0 12.0 k.l 3.0 40.8 3i^.2 25.0 1965-69 ! ! 5.»+ 9.6 12.0 \.z 2.U lt5.0 35.0 20.0 1971 ! . 6.6 11.6 Hl.l 5.0 2.5 U6.7 35.8 17.5 1973 ! ! 6.6 13.2 15.1f 6.6 2.2 .U2.9 U2.9 1Î+.2 197it ! Î 15.9 30.2 32.3 lif.3 2.1 ít9.2 U!t.3 6.5 1975 : ! 16.8 29-8 3U.lf 13.0 1+.5 ^IS 38.1 lif.0

At Los Angeles, Calif.: ! ¡Far West Los Angeles

9.5

Los Angeles

11.8 i^.3 2.3 U3.8 36.5 I96O-6Ú 1 5.2 19.7 1965-69 ! ! 3.2 9.9 11.5 U.7 1.6 U5.6 U0.6 13.8 1971 : 6.5 11. If 13.3 1^.9 1.9 lt8.9 36.8 llf.3 1973 : 6.6 1U.2 lit.7 7.6 .5 ltlt.9 51.7 3.i» 197h : 15.6 30.6 30.5 15.0 -.1 51.1 U9.2 -.3 1975 : 16.3 30.1 32.8 1U.7 1.8 »^9.0 lf5.0 6.0

1/ These are offers of s\igar distributors. Delivered prices may differ from these figures.

Cane refiners' share of the retail dollar fell from 24 to 29 percenc in 1971 (the wholesale spread) to 11 to 15 percent in 1974. In 1975, this spread increased to 19 to 31 percent. On average, the wholesale spread for cane refiners doubled between 1974 and 1975. The wholesale spread averaged 8.2 cents per pound in 1975 compared with 4.1 cents in 1974.

The distributor and retailer spread for both cane and beet sugar historically has averaged 1.5 to 2.5 cents per pound in the five markets studied. In 1974, margins declined in three of five cities and barely held steady in the other two when compared with 1973. Even though the price movements that occurred strained the data base and methodology used to derive sugar price spreads, distributors and retailers probably shaved their normal markups to the minimum, and on occasion they even absorbed losses in 1974 to hold down sugar prices. During 1975, the margin for distributors and retailers had increased to more normal levels and had averaged slightly less than 4 cents per pound (app. tables 20 to 24).

Grower returns in the sugar beet industry followed a pattern similar to that for sugarcane producers. Farm values increased substantially in 19 74 and 1975 over 1973, and the growers' share of the retail dollar increased slightly to about 50 percent. Because the beet processor receives a percentage share of the price at which refined sugar is sold, beet processors also benefited substantially from high sugar prices in 1974 and 1975. The wholesale spread for beet sugar sold in Chicago and Los Angeles about doubled between 1973 and 1974 and decreased only slightly in 1975 from 1974.

Costs of Production and Processing

USDÂ estimates of production and processing costs for sugar beets and sugarcane, excluding cane refining costs, indicated an increase of 3.7 cents per pound, raw value, for beets and 3 cents for mainland cane between 1973 and 1974 (tables 37 and 38).

Total production costs for 1974 were 8.6 cents for beets and 8.9 cents for cane, compared with average returns of 14 to 15 cents per pound raw value. Comparable 1975 production costs for beets and cane decreased, on the average, about a half cent per pound. The decreases were mainly the result of increases in yields, sugar production, and recovery of sugar.

Processing costs for sugar beets in 1975 were estimated at 7.8 cents on a raw basis or 8.4 cents on a refined basis (app. table 25),

Margins data for Chicago and Los Angeles indicate a processing or wholesale margin of 13 and 14.7 cents per pound of refined beet sugar (table 36). Based on these data, 1975 profits for beet processors averaged 4.6 to 6.3 cents per pound, far above normal levels.

For mainland cane, 1975 processing costs were estimated at 4.6 cents and refining costs at 3.7 cents on a raw basis, or about 0.3 cent per pound more on a refined basis (app. table 38)• Based on margins data, the raw sugar mill spread, which must cover processing costs, was about 10.5 cents per pound on a refined basis in 1975. The wholesale or refining margin was 6.6 to 7.6 cents.

72

Table 37--Costs of sugar beet production and processing If

Crop^ year

Cost items \ 1973 1974 : 1975 2/

Cents per pound, raw value 3/

Production: : Labor 1.434 1.598 1.584 Custom work ! .582 .808 .883

Supplies 1.219 1.730 2.051

Field power and equipment .912 1.031 1.109

Total direct costs 4.147 5.167 5.627

Indirect costs ; 1.072 1.309^^ 1.259

Administration .252 .243 .200

Interest paid .304 .431 .475

Total costs before land rent 5.775 7.150 7.561

Land rent 4/ : .705 1.495 .888 Total production costs : 6.480 8.645 8.449

Processing: Beet acquisition : .917 1.027 1.126

Factory operation : 2.894 3.539 3.493 Fixed charges : .418 .453 .361

Marketing 1 2.354 2.692 2.399 Administrât ion : .254 .306 .249

Interest paid : .152 .226 .198 Total processing costs : 6.989 8.243 7.826

Total production and processing costs : 13.469 16.888 5/16.275

1/ See appendix table 29 for costs on a refined basis. 2/ Preliininary data. 3/ The method used in estimating these crop costs is updated and follows

procedures used by ASCS for prior years^ 4/ Reflects extensive share renting that is based on producer returns. 5/ The decrease between 1974 and 1975 is mainly the result of adjust-

ments that resulted from an increase in yield per acre, an increase in total sugar production, and a slight increase in recovery of sugar.

Certainly substantial profits were made by cane and beet producers, raw cane mills, and beet processors because of high sugar prices in 1974 and 1975. Raw cane mills and beet processors benefited because of the nature of contracts with growers, which allowed for joint sharing of returns. Growers benefited in the same manner as producers of any agricultural commodity under conditions of variable supplies. In a period of shortage, prices rise and returns usually exceed production costs by a wide margin.

73

fable 38*-Estimaiecl costs of sugar caûè production, and of raw _sugar processing and refining 1/

:3

1973.crop year : 197*+ crop year ! 1975 crop year

CoiSt items joulslona : p,„„.^,„ 'Mainland Florida : ^^^ * Louisiana '

: P : Florida : Mainland cane : Louisiana : j,^^^^ Jiialniarid

cane •

Cents per potmd, raw value

Production: Cultivation 2.533 I.lt32 1.876 2.695 1.767 2.16U 3.060 1.837 2.299 Harvesting 1.33!f 1^355 1.31+6 1,509 1.501+ Ï.5O6 1.535 1.681 11626 Field services 1.1*88 .766 1.058 1.831 m 1.31^9 1.898 Ï.088 1(391+ Fixed charges :82l • 503 .631 .809 .559 .666 .797 .596 .672 Services to personnel .273 .368 .329 .288 .507 .1+13 .292 .536 :i*i+i+ Administration Ml .31^9 .382 .1*85 .1+65 .1+71+ .506 .491* .1*98 Interest paid - p ;:; •-! .170 .36h . .286 .211 .1*91 .371 .230 .581 .1*1*9 Total cost before land rent •7.050 - .•5.'137;:. . 5.9OÖ 7.02Ö 6.2Ö1 6.9Í+3 Ö.318 6.Ö13 7.30ë

Land rent !"

.9kk .375 .605 •Í'3.812 - ■^.6l3-; ;. 1.983 1.11*9 .560 .782 Total production costs 7.99't 5.512 6.513 11.61*0 6.094 Ö.926 9.467 7.373 8:161*

Processing: Cane transportation .912 .627 .7l|2 .993 .630 .785 i-04l .716 .839

^ Mill costs 2.50»» i.teo 1.857 2.851 1.705 2.196 2.926 1.91*1+ 2.316 *^ Fixed charges ;, ,5;, .^95 .tó6 .lt77 .555 .530 -5I+I .1*86 .571 .539

Marketing ,098 ;•: -^3^9 .21*8 .109 .1*03 .277 .120 .¥*6 ^ , .'323' Administration ' "',5";' .2tl .182 :218 .279 .21+6 .26«? .281* .267 .273 Rent • .076 ■-r- , .031 .09% _— .oi+ô .096 .036 Interest paid ». . .070 v253 .179 .081 .31+2 .230 .098 .4ÖÜ .288 Total processing costs *.it26 , 3:.297;. :; 5.752 h.9bs 3.^56 4,329 5.051 4.34Ö 4.614

Refining: 3/ Í, '

.■'':;"V ;•;:■'■:■■ ., .■.■:;,...;, . •;'■„.;■': ,

Labor and fringe 1.186 1.186 1.186 l.feif 1.1)21+ 1.1*24 I.5I+5 1.51+5 1.51+5 Excise tax .k93 .»^95 .1+95 .1+95 .1+95 .1+95 Transportation expense •569 .569 .569 .678 .678 .678 .736 .736 .736 State and local .083 >083 .083 .092 .092 .098 .099 .099 .099 Other k/ ::''.^36v' • .■:/:.-936 ;:>:-■ .936 1.237 1.237 1.237 1.31*3 I.3Í+3 1.31*3 Total refining costs 3.269 3.269 3i269 3.926 3>926 3.926 3.723 3.723 3.723

Total costs o£ production, processing, and refining 15-689 12.078 13*53^ 2/20.528 Ik.676 17.181 18.2I1I l^.kkh 16.501

1/ The method use4 in estimating crop posts iß çpiisistçnt with ^^ß^ used by ASCS for prior years. 2/ Reflects extensive share renting lihat returi^s» 3/ Ho regional cost data available for refining. 5/ Includes brokerage fees, utilities, packages, depreciation, sales discount, and other operating charges.

Performance of Individual Companies

Data on the performance and profits of selected beet processors and cane refiners were included in this study. Individual company data were obtained principally from the "Staff Report on Sugar Prices'* by the President's Council on Wage and Price Stability. Data include corporate structure, number of factories, plant capacity, sales, net profit on stockholders' equity, and net profit on sales (tables 39 to 42). These data reflect substantial increases in sales and returns on equity, especially for beet processors in 1974 and 1975. The 12 listed companies had 71 percent of the U.S. cane refining capacity and 76 percent of the U.S. beet slicing capacity, or 89 percent of the beet slicing capacity when subsidiaries and company divisions are included. Two of the major sugar firms are cooperatively structured: California and Hawaiian Sugar Company and The American Crystal Sugar Company. Both organizations met the requirements set forth in the Capper-Volstead Act.

In addition, data are summarized for 12 firms on the basis of assets and the rate of return on stockholders' investment (app. table 17). These data were taken from reports of the Federal Trade Commission and reflect the relatively low profit levels of some companies^during the 1970-73 period. When compared with higher profits in 1974 andnearly in 1975, percentage increases for low-profit companies seem more extreme than for those firms which consistently averaged higher returns during the entire 1970-75 period.

Price Leadership

Pricing announcements were examined for the various pricing areas to see if any one or more firms tended to dominate in a|iy given territory and to act as price leader with other firms following their example. A tabulation of price announcements for 1974 and 1975 through early in June tends to support this type of price leadership pattern (table 43). Price announcements were recorded as setting a new price level or plateau or as catching up with a previous announcement by a competing firm. New plateau announcements were further classified as to whether a single company or more than one firm made the announcement on a given day.

During the January 1 to mid-November 1974 period of price advances, about half the announcements set a new plateau for the i^t err i tory. In more than 60 percent of the cases, the new plateau price was announced by one firm. For all the territories except the Northeast, either C & H or Colonial sugar tended to act as the price leader, and the beet processors tended to lag behind with their increased price announcements. /When the strong pressure on the world sugar market during much of 1974 is considered, these price patterns seem rational. Beet prices were being pulled up by cane prices.

When sugar prices started to decrease, an entirely different pattern emerged. Only 9 of 140 downside announcements were catching up with previous decreases. Most of the decrease announcements set: a new plateau and were made jointly with one or more firms. In addition, any and all firms in a territory precipitated price changes. Price decreases were quickly matched by competing firms and announced frequently on the same day.

75

Table 39~Structural and other <îharacteristics of selected raw sugar refineries and beet sugar processing conipanies, 1975

Type and ríame : of company ;

\ Daily cane * ¡Kumber of factories* refilling or beet ' 1 • slicing capacity *

Percentage of U.S. cane refining or beet slicing

capacity

Short tons, raw value Percent

Cane refiners: ; Amstar Corp. l/ j 5 10,900 3h Sucrest Corp. ; 3 2,880 8 Savannah Foods ; : 2 2,300 7 National Sugar : 1 2,100 7 Southdown : ! 1 700 2 California- ; Hawaiian 2/ : ; 2 3,690 12

Total of 6 : companies : [ li^ 22,570 71

U.S. total ! 23 31,670

Tons

100

Beet processors: Utah-Idaho \ k 21,600 10 Amalgamated Sugar: ! k 26,525 13 American Crystal 2/ \ 6 27,600 13 Great Western Sugar 3/ î Î 15 lfO,950 20 Holly StJ^ar I 9 33,000 16 Kölchigan Sugar Í Jf 8,950 _k

Total of 6 companies i m 158,625 76

U.S. total ^ 0 208,225 100 1/ In addition, the Sprecléies Division of Amstar has five factories, a daily

slicing capacity of 22,700 tons of sugar beets, and 11 percent of U.S. capacity. _2/ The California and Hawaiian Sugar Company and the American Crystal Sugar

Company are cooperatives; th^ others listed are corporations. 3/ Great Western*s subsidg^ry^ Northern Ohio Sugar Company, operates two fac-

tories with a slicing eapacity of 4,800 tons^ or 2 percent of Ü.S, capacity. Source: Staff Report On Sugar Prices, Office of Wage and Price Monitoring,

Council on Wage and Price Stability, Executive Office of the President, May 1975. Revisions by task force menders. California-Hawaiian data from Economic Analysis of Proposed Effluent Guidelines, Cane S^igar Refining Industry, Office of Planning and Evaluation, U.S. Environmental Protection Agency, Oct. 1973. Sugar beet slicing capacity was from the report of the U.S. Beet Sugar Association, 1975-76.

76

Table 40--Sales of selected raw sugar refining and beet sugar processing companies

; Fiscal ; [ year ]-

Sales for fiscal year ending in--

Type and name ':

of company '. on-- ',

1970 : •-

1971 : 1972 : 1973 : 1974 : 1975

Ml n -i nn dollars -

Cane refiners; Amstar Corp. : 6/30 561 660 682 683 1,046 1,687 Sucrest Corp. : 6/30 126 138 148 158 229 416 Savannah Foods : 12/31 166 177 181 217 463

«/" National Sugar • 12/31 109 112 124 134 221 Southdown 2/ ■ 12/31 34 34 36 44 120 NA California-Hawaiian : 12/31 236 258 302 319 603 NA

Beet processors: Utah-Idaho 2/28 81 91 100 115 143 237 Amalgamated Sugar 9/30 107 104 119 129 200 176 American Crystal 3/ 97 112 109 121 173 254 Great Western Sugar : 5/31 171 160 180 184 220 508 Holly Sugar 3/31 85 99 95 101 112 276 Michigan Sugar 9/30 30 33 29 29 61 84

1/ NA means not available. 2/ Sales from milling and refining only; does not include sales from growing

sugar cane. 3/ Fiscal year ended on 3/31 in 1970, 1971, and 1972 and on 8/31 in 1973,

1974, and 1975. This reflects the change from a stockholder corporation to a cooperative in 1972.

Source: Staff Report on Sugar Prices, Office of Wage and Price Monitoring, Council on Wage and Price Stability, EKecutive Office of the President, May 1975. Revisions by task force members.

TEE FUTURE

Conditions Si^ce the 1974 Price Rise ^

Sugar prices have declined sharply since the November 1974 'peak raw price of 57.3 cents per pound. The New York spot raw price averaged 11.kl cents in 1975 and 13.90 cents in the first 10 months of 1976. The 9.80-cent average for September 1976 was the lowest since the April 1973 average of 9,65 cents.

Several factors have been used to explain the price decline in 1975. Reduced purchases in the face of high prices, compounded by unemployment and generally lower consumer purchasing power, resulted in a surprisingly sharp

77

Table 41-^-Net profit on stockholders' equity for selected raw sugar refineries and beet sugar processing coTi^anies

"Fiscal year

: Net profit on stockholders ' equity Type and name Î for fiscal .yetar ending in— of coîfîpany • • • • : :

, ended . on^-

: 1970 : 1971 11972 : é * • «

1973 : 1974 : • •

1975

, - _ "OrsvrM-íinir

Cane refiners:

— — — ——— — — i. ^im v^x* u — ■

Amstar Corp. ! 6/30 9.34 12*35 9,49 6.23 15.49 16.94 Sucrest Corp, : 6/30 6.55 7.53 4.46 Loss Loss 55.65 Savannah Foods : 12/31 13.26 12.17 10.43 8¿62 Loss l/NA National Sugar : 12/31 ,8 1.41 Loss 1.16 Loss NA Southdown : 12/31 NA NA NA NA NA NA €alifornia-Hawaiian : 12/31 NA NA NA NA^ NA NA

Beet pfocessors: Utah-Idaho ! 2/2S 8;^1 6,45 7.30 2.35 7.86 11.12 Anslgamated Sugar : 9/30 9.32 9i 64 10.03 11.09 27.04 25.49 Ajrórícan Grystal : 2/ 2.33 4.9^ 4.95 Löss 49.34 56.27 Gieat Western Sugar : 5/31 NA NA NA NA NA NA Holly Sugar : 3/31 Loss 2.81 4.98 5V81 10.80 40.19 Michigan Sugar : 9/30 7*42 10.01 2.91 2.38 33.94 46.85

Vi NA means not available. 2A Fiscal year ended on 3/31 in 197», 1971, antíi 1972, and on 8/31 in 1973,

1974V and 1975. ^is reflects change from a stockholder corporation to a cpôperéitlve in 1972.

Spureei S%a£t Report on Sugar Pric€s^ i9f f ice of ^Jage and J*rice Monitoring, Council on Wage and Price Stability, Executive OfMoe of tbe^ President, May 1975. Revisions by task force members.

dip in sugar Gonsumption in the United States. Also, it is likely that the paniG over high priées yielded to the realization that consumer shortages had been exaggerated and that crops in some major producing countries were not damaged to the extent expected.

Sugar prices which had been inflated could not be maintained, and so they broke. Once started, this trend was fed by inventory reductions and other reactions in puch the same manner as the similar actions which amplified the price rise. ^^

Outlook

In the long term, the level of U.S, sugar prices will depend heavily on policy decisions concerning the extent of protection for the domestic

78

Table 42--Net profit on sales for selected raw sugar refiners and beet sugar processing companies

Fiscal i year

Net profit on sales for Type and name fis< cal year ending in—

of company ,ended

on-- . 1970 : 1971 : 1972 : 1973 ': 1974 ; 1975

^_ 'D£^Vr*£%'r**'

Cane refiners:

- — Í ^i v.^ Litm

Amstar Corp. 6/30 2.53 3.14 2.44 2.19 3,00 2.31 Sucrest Corp. 6/30 1.03 1.13 .63 Loss Loss 1.33 Savannah Foods 12/31 2.76 2.51 2.23' 1,60 Loss 3.90 National Sugar 12/31 .18 .34 Loss .22 Loss 1/NA Southdown 2/ i 12/31 5.21 3.32 2.96 3.07 Loss NA California-Hawaiian • 12/31 NA NA NA NA NA NA

Beet processors Utah-Idaho 2/28 4.20 3.04 3.52 .96 2.76 2.42 Amalgamated Sugar ; 9/30 4.89 5.42 5.10 5.52 10.35 13,30 American Crystal : 3/ 1.18 2.23 2.31 Loss 11.15 15.55 Great Western Sugar 5/31 1.10 1.74 2.07 1.88 4.68 10.51 Holly Sugar : 3/31 Loss 1.12 2.31 2.62 4.75 10.38 Michigan Sugar ; 9/30 2.34 3.15 1.10 .86 8.68 12.66

1/ NA means not available. 2/ Sales from milling and refining only. 3/ Fiscal year ended on 3/31 in 1970^ 1971, and 1972, and on 8/31 in 1973,

1974, and 1975. This change reflects the change from stockholder corporation to a cooperative in 1972. ^

Source: Staff Report on Sugar Prices, Office of Wage and Price Monitoring, Council on Wage and Price Stability, Executive Office of the President, May 1975. Revisions by task force members.

industry. If the United States electo to continue the present course of action (a non-restrictive global import quota with the present 1.875 centá per pound duty), then U.S. prices should closely follow world levels. Since the expiration of the Sugar Act and prior to the September 21, 1976, duty increase, the New York raw sugar price had consistently been 1.4 to 1.6 cents per pound above übe world quote (Caribbean ports). Since the increase in duty, the differential between thé world and the U.S. spot price has widened to about 2.6 cents per pound. This price difference is very consistent with the present tariff, freight, and insurance rates.

Future world prices will depend largely on the rate at which sweetener production expands relative to niemand. A recent ERS study projected: world

79

Table 43—Price announcements for various pricing territories, January 1974 through June 1975

Price increases Price decreases New price plateau

Catch- up

announce-

Total of all - announce-

New price plateau Catch-

up announce-

Total Pricing area and

Solo With one or more Total

conçany Solo

:With one : or more

of all announce-

firms ment ments : firms ment ments

Number of announcements

Pacific Coast territory: C&H (cane) 9 10 19 0 19 4 4 0 8 SpreckeIs (beet) 1 5 6 2 8 1 1 0 2 Holly (beet) 0 6 6 12 18 1 4 1 6 Other 1 ^0 1 0 1 0 0 0 0 Tota.1 11 21 32 14 46 6 10 1 17

Intermountain Northwest: cm (cane) 16 5 21 1 22 1 7 0 8 Utah-Idaho (beet) 2 5 7 11 18 0 8 0 8 Amalganiated (beet) 2 2 4 5 9 0 8 0 8 Other 1 0 1 0 1 0 0 0 0 Total 21 12 33 17 50 1 23 0 24

Southeast : Âmstar (cane) 1 3 4 1 5 0 0 0 0 Colonial (cane) 15 5 20 2 22 6 0 0 6 Savannah (cane) 3 5 8 2 10 2 0 1 2 Other 1 0 1 0 1 0 0 0 0 Total 20 13 33 5 38 8 0 1 9

Gulf: Colonial (cane) 18 1 19 0 19 6 0 0 6 Other • 1 1 2 0 2 1 0 1 2 Total 10 2 21 0 21 7 0 1 8

Southwest: Inçerial (cane) 4 2 6 10 16 2 4 0 6 C&H (cane) : 5 5 10 7 17 2 4 1 7 Holly (beet) : 1 0 1 24 25 1 3 0 4 Great Western (beet) : 2 0 2 13 15 0 1 0 1 American. Crystal (beet ) 0 0 0 10 10 0 3 0 3 Colonial (cañe) 19 3 22 4 26 Other 1 0 1 7 8 0 3 0 3 Total 32 10 42 75 117 10 19 2 31

Chicago-West: Amstar (cane) 1 1 1 2 5 7 0 0 0 0 C&H (cane) : 8 4 12 9 21 3 2 0 5 Utah-Idaho (beet) 1 0 1 16 17 0 5 0 5 Amalgamated (beet) : 0 0 0 11 11 0 5 0 5 Great Western (beet) : 1 0 1 17 18 0 4 0 4 Holly (beèt) : 0 0 0 25 25 1 5 0 6 American Crystal (beet) : 0 0 0 12 12 0 5 0 5 Colonial (cane) : 17 5 22 3 25 5 0 1 6 Total : 28 10 38 98 136 9 26 1 36

Northeast: National (cane) ': 3 4 7 1 8 3 2 1 6 Sucrest (cane) : 2 6 8 1 9 1 2 1 4 CPC International (cane) : 0 0 0 1 1 0 0 0 0 Other : 4 3 7 4 11 1 3 1 5 Total : 9 13 22 7 29 5 7 3 15

Total of all territories \ 140 81 221 216 437 46 85 9 140

Source: LatobornSugai?^Market Report, various issues.

80'

prices to 1980 under U.S. free trade. 13/ The study used a simplified econometric model of the world sugar market under free trade which was estimated over the historical period 1954/55 to 1974/75 (May to April crop years). The price equation in the model is:

WPRICE^ = 11.64 - .00105 WSTKS^ - .00053 ROWPROD^ -f 2.456^

WPRICE is world raw sugar price in cents per stocks at the beginning of the crop year (tons production outside the United States (tons).

pound, WSTKS is world raw sugar ), ROWPROD is world sugar

and t is trend (1974/75 = 28),

Several alternative scenarios involving different assumptions with respect to weather conditions, constraints on production, world per capita consumption changes, and international sugar agreement operations were simulated. The range in prices generated under the sets of selected conditions and the "basic solution" projections are shown in table 44.

Table 44—World raw sugar price projections

Crop year ] Basic soluti on price • •- • Range in price

Cents per pound, raw value

1976/77 : 16 .50 10.70 - 22 .50 1977/78 : 12. .30 8.80 - 19 .50 1978/79 ! 11, .70 7.00 - 17 .60 1979/80 : 13, .90 8.40 - 18 .30

13/ See Jesse, Edward V., and Glenn A. Zepp, "Sugar Policy Options For The United States," Commodity Economcis Division, Economic Research Service, U.S. Department of Agriculture, Agricultural Economic Report No. 351, February 1977,

81

APPENDIX A: TABLES

82

Appendix table 1—Dotnestic disappearances for U.S. food use of caloric and noncaloric sweeteners

Refined cane and beet sugar Corn , ä-weeteners l/ Minor caloric sweeteners 1/

Total j caloric !

\ Noncaloric sweeteners 2/

Calendar u*s. -grown sugar Cane sugar

! Total \ Corn

sirup

!

: Dex- ; trose . Total Honey ' Sdible

[ sirups : Total : Sacc- harin

Cycla- [ mate

' Total year Beet ; sugar '

Cane- sugar

Total i ;

Imçjorted: Total •

¡ non . í caloric

1,000 tons

i960 1961 1962 1963 1964 .

Î 2,278 2,396

: 2,227 , 2,570

2,732

2,537 2,635 2,610 2,632 2,901^

it,8l5 5,031 U,837 5,202 5,636

U,002 3,952 »»,237 3,9W 3,632

6,539 6,587 6,8U7 6,580 6,536

8,817 8,983 9,07if 9,150 9,268

739 786 865 939

l,ol^8

307 312 333 to7 390

1,01+6 1,098 1,198 1,31+6 l,i+38

105 100 106 102 98

73 73 79 63 65

178 173 185 165 163

10,041 10,254 10,457 10,661 10,869

171 195 230 288 337

30 31 42 64

120

201 226 272 352 457

1965 1966 1967 1968 1969

; 2,847 2,789

. 2,616 ' 2,817

3,029 Î

2,931 2,820 2,9lH 2,68it 2,5U8

5,778 5,609 5,557 5,501 5,577

3,601 3,978 lt,105 it,535 i^,567

6,532 6,798 7,0tó 7,219 7,115

9,379 9,587 9,662

10,036 10,li^5

1,068 1,107 1,3^3 1,192 1,253

399

teo

1+52

1,^7 1,519 1,51+3 1,626 1,705

10l+ 99 91 90

10l+

72 69 53 67 62

176 168 144 157 166

11,022 11,274 11,3^9 U,8l9 12,016

386 if39 477 496 541

165 192 204 225 156

551 631 681 721 697

1970 1971 1972 1973 1974

! 3,23lt : 3,ai5 i 3,177 ! 3,220 ! 2,771

2,575 2,357 .2,652 2,633 2,238

5,809 5,572 5,829 5,853 5,009

it,691 5,021 it,920 it,891 5,271

7,266 7,378 7,572 7,52»t 7,509

10,500 10,593 10,7¡t9 10, 7^+ 10,280

1,297 l,3i^7 1,563 1,823 2,085

1*66 U77 1*57 50lt 1+98

1,763 1,821+ 2,020 2,327 2,583

97 92

10l+ 93 87

55 1+8

I?

153 l47 152 146 134

12,4l6 12,564 3^,921 13,217 12,997

633 591 59^ 595 742 1 633

591 59^ 595 742

1975 y ! 3,089 2,672 5,761 3,715 6,387 9,'t76 2,^^03 1+81 2,881+ 89 45 134 12,494 641 3/ ë4l

1/ Dry basis. 2/ A sugar sweetness equivalent assumes that saccharin is 3OO times as sweet as sugar and that cyclamate is 30 times as sweet as sugar. 3/ Cyclainate food use was banned by the Food and Drug Administration, effective in 1970. 5/ Preliminary data.

AppendíSt table 2—Percentage distribution of U.S. consumption by type of caloric and noncaloric sweeteners

00

Reflned cane and beet sugar Com sweateners 1/ Minor caloric sweeteners l/

Total '

\ Noncaloric sweeteners 2/

Calendar ; U.S. -grown sugar Cane sugar ' Com " Dex- > Edible caloric ' Sacc" Cycla-^

mate '

: Totax year * ■Root ■ Cane- Total sirup Í trose Total . Honey

Aim's ñ mim m^i^\^

^ sirups ' Total Î harine non

1 sugar ' sugar : Totea ! Imported Total i Î calorxc

Percent

i960 . 22.7 25.3 W.O 39.8 65.1 87.8 7.1* 3.0 10.1* 1.1 0.7 1.8 100,0 1.7 0.3 2.0 1961 : 23.lt 25.7 itg.i 38.5 61*.2 87.6 7.7 3.0 10.7 1.0 .7 1.7 100.0 1.9 -3 2.2 1962 ! 21.3 2k.$ 146.2 1(0.5 65.1* 86.7 8.3 3.2 11.5 1.0 .8 1.8 100.0 2.2 .1+ 2.6 1963 . 2k.X 24.7 1(8.8 37.0 61.7 85.8 8.8 3.8 12.6 1.0 .6 1.6 100.0 2.7 .6 3.3 196U ! 25.2 26.7 51.9 33.1* 60.1 85.3 9.6 3.6 13.2 .9 .6 1.5 100.0 3.1 1*1 k.2

1965 i 25.8 26.6 52.U 32.7 59.3 85.1 9.7 3.6 13.3 1.0 .6 1.6 100.0 3.5 1.5 5.0 1966 ! 2k.8 25.0 1*9.8 35.3 60.3 85.1 9.8 3.6 13.1* .9 .6 1.5 100.0 3.9 1.7 5.6 1967 ! 23.0 25.9 U8.9 36.3 62.2 85.2 9.9 3.7 13.6 .8 .If 1.2 100.0 k.2 1.8 6.0 1968 ¡ ■ 23.9 22.7 1*6.6 38.1* 61.1 85.0 10.0 3.7 13.7 .8 -5 1.3 100.0 k.2 1.9 6.1 1969 ! 25.2 21.2 1(6.1* 38.1 59.3 81*. 5 10.1* 3.8 ll*.2 .8 .5 1.3 100.0 4.5 1.3 5.8

1970 ! ! 26,0 20.7 1*6.7 37.8 58.5 81*. 5 10.5 3.8 ll*.3 .8 .h 1.2 100.0 5.1 3/ 5.1 1971 : 25.6 18.7 1*1*.3 39.8 58.5 81*. 1 10.7 i*.l ll*.8 .7 .k 1.1 100.0 h.7 3/ k.7 1972 : 2k.6 20.5 1*5.1 38.0 58.5 83.1 12.1 3.6 15.7 .8 .h 1.2 100.0 k.6 3/ k.6 1973 : ! 2V.lt 19.9 1*1*. 3 37.0 56.9 81.3 13.8 3.8 17.6 .7 .k 1.1 100.0 i^.5 3/ h.3 197^ s 21.3 17.2 38.5 1*0.6 57.8 79.1 16.1 3.8 19-9 .7 ■3 1.0 100.0 5.7 J/ 5.7

1975 ii/ 1 , 2lt.7 21,3 1*6.0 29.7 51.0 75-7 19.2 3.9 23.1 .9 .3 1.2 100.0 6.0 3/ 6.0

1/ Dry basis. "1/ À sugar sweetness equivalent assumes that saccharine is 300 times as sweet as sugar and that cyclamate is 30 times as sweet as sugar.

Percentages are based on total caloric sweeteners, 3/ Cyclamate food use was banned by the Food and Drug Administration, effective in 1970. 5/ Preliminary data.

Appendix table 3—Per capita U.S. consußiption of caloric and noncaloric sweeteners

Calendar year

i960 1961 1962 1963 196k

1965 1066 1967 1968 1969

1970 1971 1972 1973 197^

1975 it/

Refined cane and "beet sugar

Ü.S 4-grown sugar

Beet sugar

Gane- sugar Total

Canesu^ar

Imported Total

25.2 26.x 23-9 27.2 28.5

29.3

26.3 28.1 29.9

3I-6 31.1 3P.5 30.6 26.2

28a 28.7 28,0 27.8 30,3

30.2 28.7 29.6 26.8 25.1

25.1 22.8 25. H 25.0 21.1

53.3 5^.8 51.9 55.0 58.8

59.5 57a

5^.9 55.0

56.7 53.9 55.9 55.6 i^7.3

kk.3 Í3.0 k%.k ^1.7 37.8

37/1 ^0,5 In.if 1^5.2 k5.1

h3.B

i+7.1

^9.7

72.4 71.7 73.if 69,5 68.1

67. 69. 71. 72, 70.

70.9 71.3 72.5 71.5 70.8

Total

97.6 97.8 97.3 96.7 96.6

96,6 97.6 97.3

100.1 100.1

102 102, 103. 102, 97.

Com sweeteners l/

Corn slrtip

Dex- trose

8.2 8.6 9.3 9.9

10.9

11.0 11.2 11.3 11.8 12.3

12.7 13.0 15.0 17.3 19.7

Total

Minor caloric sweeteners l/

Honey

Pounds

3^h 3.6 if.3 4.1

4.1 4.2 4.2 4.3 4.5

4.6 5.0 4.4 4.8 4.7

11.6 12.0 12.9 14.2 15.0

15.1 15.4 15.5 16.1 16.8

17.3 18.0 19.4 22,1 24.6

28.9 25.0 53.9 34.8 59.8 88.7 22.5 4.5 27.0

.9 1.0

1.0 .9

1.0 .9 .8

1,0

Edible sirups

3.8 .8 .9 .7 .7

.7

.7

.5

.7

.6

.5

.5

.5

.5 ,4

2.0 1.9 2.0 1.8 1.7

1.8 1.7 1.4 1.6 1.6

1.5 1 4 1.5 1.4 1.2

*Noncaloric sweeteners 2/

U1.2 1.9 0.3 2.2 111.7 2.1 .It 2.5 nPip. 2.5 .4 2.9 112.7 3.0 .7 3.7 113.3 3.5 1.3 lt.8

113.5 U.o 1.7 5.7 114.7 h.5 1.9 6.1+ ilh.2 k.8 2.1 6.9 117.8 5.0 2.2 r.2 U8.5 5.3 1.6 6.9

121.3 6.2 3/ 6.2 121.8 5.7 3/ 5-7 123.9 5.7 3/ 5.7 125.6 5.7 3/ 5.7 122.6 7.0 3/ 7.0

1.4 117.1 6.0 3/ 6.0

1/ Dry bsisis.

2/ A sugar sweetness equivalent assumes that saccharine is 300 times as sweet as sugar and that cyclamate is 30 times as sweet as sußar Percentages are based on total caloric sweeteners. as sugar. 3/ Cyclamate food use was banned by the Food and Drug Administration, effective in 1970. jf/ Preliminary data.

appendix table 4—Shares pf U.S. sugar marketings

up ON

Puerto Rico and Domestic Mainland All Republic : Caribbean Mexico and South : Eastern Otter All foreign Year .Hawaii Virgin Islands beet cane domestic of the : Islands Central America America :Hemisphere 3/ areas

L/ 2/

areas Philippines

Percent

1960 ! 8.9 9 .5 22.7 6 .5 47.6 12.1 31.2 4 ,9 3, 9 0, 1 0.2 52, 4 1961 : 10.7 10 .2 26.8 8 .1 55*8 13.9 7.4 7, 8 10 ,5 4. 4 .2 44, .2 1962 . 11.1 9 »3 24.7 8 ,0 53.1 12.8 11.4 5. 4 10, 9 5. 6 .8 46, 9 1963 . 9.8 8 »5 28.2 10 ,2 56.7 11.3 8.2 5, 1 11, ,7 6. 6 A 43, 3 1964 12.2 8 .8 29.7 9 .9 60.6 13.4 6.5 7 2 5, J 6, 6 39, 4

1965 11,4 8 A 30.5 11 .1 61.4 11.9 7.0 6 .6 7 .3 5 J .1 38 .6 1966 11.6 6 .9 29.2 10 .6 58.3 11.5 8.3 6 .9 10 .3 4 J — 41 J 1967 12.1 6 .8 27.1 11 .3 57.3 10.8 8.6 7 .5 11 .0 4 8 -..- 42 J Í968 10.9 4 ,6 28.1 11 ;o 54.6 10.3 9.3 8 .4 12 J 4 .7 -:*^ 45 A 1969 10*8 3 •2 30.0 10 .8 54.8 10.5 9.5 9 .1 11 A 4 .7 45 ,2

1970 9.9 .v i^'3' .1 30.9 11 .3 55.2 11.2 8.6 8 .4 11 .9 4 J 44 .8 1971 9.6 1 .3 30.5 11 .1 52.5 14.1 8.5 8 .3 11 .9 4 J —--- 47 .5 1972 9.4 1 .2 29.7 13 .8 54a 12.0 7.9 9 .0 12 ,0 5 .0 -'— 45 .9 1973 9.S 0 :6 3oa 13 .8 54.3 12.5 6.8 8 .9 11 .7 5 .8 »„- 45 .7 1974 8.9 1 A 27.0 11 A 48.7 13.2 9.9 8 .5 13 .8 5 .9

"" 51 .3

1975 . 9.9 1 ,0 34.1 14 .8 59.8 4.3 10.6 "■4 .9 7 ,7 12 .0 ,7 40 .2

\l Does not include Virgin Islands after 1966.

2J Includes Texas cane area beginning in 1973.

3/ Countries which did not have quotas after 1965. In 1964 these countries did not ship any sugar.

Source; Derived from table 3.

Appendix table 5--Foreign quota charges by area and country

Area and country Quota in calendar year--

: 1960 1965 1970 : 1974 : 1975 1/

1,000 short tons. raw value

South America: Brazil ! 100 269 638 783 199 Peru : 275 293 456 471 215 Argentina . 67 79 110 112 Columbia : 34 67 105 162 Ecuador : 60 91 59 47 Paraguay : 8 3 Bolivia 8 6 4 Venezuela : 3 32 2/ Total 375 726 1,371 1,542 742

Republic of the Philippines : 1,155 1,178 1,298 1,472 413

Caribbean Islands: Dominican Republic 451 469 678 813 775 British West Indies 93 148 217 282 236 Haiti 33 23 22 19 12 Bahamas 10 — Cuba 2,394 French West Indies — 52 68 — Total 2,971 692 995 1,114 1,023

Mexico and Central America: Mexico 400 475 653 538 42 Guatemala 6 43 63 96 61 Costa Rica 10 42 75 71 57 Panama 6 18 37 65 94 El Salvador 6 21 47 62 107 British Honduras (Belize) 5 16 56 46 Nicaragua 40 49 75 53 58 Honduras 8 5 6 Total 468 653 974 946 471

Eastern Hemisphere: Australia 200 206 236 464 China, Republic of 10 73 86 90 143 India 104 83 85 187 South Africa 104 61 67 134 Fiji Islands 49 45 48 — Mauritius 16 18 46 26 Swaziland 10 7 41 36 Thailand — 19 26 124 Malagasy Republic 7 10 13 13 Malawi 10 27 Reunion 2 Total 10 565 535 662 1,154

Other Countries: 15 11 5 0 74 Total foreign 4,994 3,825 5,178 5,736 3,877

1/ No quotas were in effect for 1975. Data for 1975 represent receipts. 2/ Less than 500 tons.

Source: Sugar Reports, ASCS,and Sugar Market News, AMS.

Appendix table 6--líuinber of factories operated by cane refiners and beet sugar processors

00 00

: Number •of factories in calendar year-- Type and name of company ' 1960 ' • • 1965 ; 1970

• • 1974 • *

: 1975 •

Cane refiners: Amstar Corporation ! 5 5 5 5 5 California and Hawaiian Sugar Company : 2 2 2 2 2 Savannah Foods and Industries, Inc. : 1 2 2 2 2 Sucrest Gorporation : 2 2 2 1/3 3 Colonial Sugars Company : 1 1 Imperial Sugar Company : 1 1 Godchaux-Henderson Sugar Company, Inc. : 1 CPC International^ Inc. : 1 1 National Sugar Refining Company : 3 1 Supreme Sugar Refinery : 1 1 Southdovn Sugars, Inc. : 1 1 Revere Sugar Refinery : 1 1 2/ - HeÇLaerson Sugar Refinery, Inc. : 1 - - - Godciiaùx Süg^r Refinery Compariy : - - - All others : 3 4 5 4 4 Total 23 24 24 23 23

Beet sugar ptocessors: The Great Western Sugar Company j3/ ! 18 18 18 18 18 Spreckels Sugar Division, Amstar Corporation 3 4 5 5 5 Holly Sugar Corporation 10 11 10 9 9 Michigan Sugar Company 4 4 4 4 4 The Aiïialgamatèd Sugar Company 6 5 5 4 4 The Aiflérican Gi-ystal Sugar Company 9 9 8 6 6 Utah-Idaho Sugar Company 6 5 5 4 4 Union Sugar Division, Consolidated Foods Corporation ; 1 1 1 1 1

All others 5 5 2 4 5 Total 62 62 58 55 56 Total for all refiners and processors ; 85 86 82 78 79

1/ Commenced operating the Revere Sugar Refinery in July 1974. 2/ Ceased operations in May 1974< 3/ Includes operations of the Northern Ohio Sugar Co. Source: ASCS*

Appendix table ?—Calendar year sugar production, short tons, raw value, from cooperative and independent mills, Vitli percentages of each by areas

State and

! 1960 1965

: 1970 : 197it 1975 1/

tyiJe of mill I Mills

• ^Production

rPerqantage: : of : :production:

Mills :Production : Percentage: ; of :production:

Mills : :Percentage: :Production: of : : :production:

mils :Production ÏPercentage : of :production

Mills tJProduction sPercentage : of

!. Number Tons Percent Nuinber Tons Percent NuBotoér Tons Percent Number Tons Percent Nuniber Tons Percent

Louisiana; :

Cooperative Independent

: 10

: ^ 121,1^50 338,672

26.lt 73.6

n 36

171,856 376,173 ¡1:1 U

32 199,160 33.0 40U,275 67.0

Ih 23

251,803 333,91^8

^3.0 57.0

Ik 22

292,512 366,138

kk,k 55.6

Total

Florida:

Cooperative Independent

Total

Texas:

Cooperative (This mill is new and is the only one in Texas)

Hawaii :

Total

hS ^460,122

173.882

173,882

100.0

100.0

100,0

^7

3 7

10

5^+8,029

76 1,569,7^8 100.0 82 2,3¿6,0'+l

1/ Data for 1975 ^e preliminary.

Source: ASCS and AMS,

100.0

167,508 29.9 ' 392.837 70.1

560,345 100.0

Cooperative ; Independent : 27 9^3,ihk 100.0 25 1,217,667 lOO.O

Total : 27 935,7i^ 100.0 25 1,217,667 IpO.O

.1 ares s : :

Cooperative : Independent :

10 66

121, If 50 l,MhQ,29Q

7.7 92.3

li| 68

339,364 1.986,677

lk.6 85. If

100.0

k3 603,435 100,0

183,461 30.7 413.668 .69.3

37

597,129 100.0

585,751

274,273 467,058

741,331

61,774

23 1,162,027

23 1,162,027

l4 382,621 61 1,980,Qi4

75 2,362,635

100.0

100.0

16.2 83.8

18 1,040,742

18 l,o4ö,742

18 46

587,850 1,841.748

100,0 64 2,429,598

100.0

37.0 63.0

100,0

100.0

100.0

100.0

36 658,650

964,612

100,956

18 1.107.199

18 1,107,199

24.2 18 724,205 75.8 45 2,107.212

100.0 63 2,931,417

100.0

330,737 34.3 633.875 65.7

100.0

100.0

IQO.O

IQO.O

25.6 74.4

100.0

Appendix table 8--Number of Ü. S. sugar beet farms 1/

Number of farms in calendar year--

Region and State : 1960 • • 1965 ' • 1970 • 1973 • • • 1974

Far West: : Arizona — 90 45 73 California : 2,363 2,231 1,474 1,252 1 137 Idaho : 4,070 3,605 2,415 1,920 1,456

Nevada 10 18 — ---

Oregon : 567 383 274 242 187 Washington : 1,159 1,188 855 888 645 Total : 8,169 7,425 5,108 4,347 3,498

Central: Arkansas . — 1 — —

Colorado ': 4,206 3,096 2,006 1,359 1,455 Iowa : 24 33 . 17

Kansas : 131 199 234 152 159 Minnesota : 930 1,275 1,184 818 995 Missouri" : --- 5 — —

Montana : 1,269 1,009 801 570 537 Nebraska : 1,697 1,460 1,177 965 1,022 New Mexico : 9 41 35 7 4 North Dakota : 582 897 811 574 806 South Dakota : 123 ---

Texas : 51 434 311 190 196 Utah : 1,833 1,304 873 449 440 Wyoming : 992 864 710 575 540 Total : 11,847 10,612 8,165 5,659 6,154

Eastern: Illinois ': 79 31 -.-- --- ■ ■--- -

Indiana : 2 — — —

Maine : —- — 2 — ---

Michigan : 2,885 2,674 2,173 1,794 1,624 New Jersey : ■-": '

. ___ 18

New York : — 773

Ohio : 921 1,091 970 638 688 Pennsylvania — 6 --- Wisconsin : 318

: 4,203

— — —

Total 4,571 3,169 2,432 2,312

Total for beet regions ! 24, 219 22,608 16,442 12,438 11,964

-1/ Appendix table 11 gives the average planted acreage for each. Data for 1975 are not available. Source: Sugar Reports, ASCS.

90

Appendix table 9--Sugar beet production in the United States

Production in crop year -- Región and State

: 1960 : 1965 \ 1970 : 1973 : 1974 : 1975 1/

1,000 tons

Far West: Arizona California Idaho Nevada

': 4,397 : 1,740 : 8

5,955 2,818

27

Til 7,393 3,104

232 6,569 2,920

330 5,923 1,842

366 8,890 2,942

Oregon Washington Total

: 470 : 781 : 7,396

454 1,356

10,610

424 1.196

12,344

477 2,476 12,674

267 1,551 9,913

426 2.142

14,766

Central: Colorado Iowa

: 2,761 : 18

2,076 32

2,383 23

1,851 2,286 2,661

Kansas Minnesota Missouri

: 154 1,018

331 1,318

706 1,811

1

605 2,169

597 2,097

667 2,783

Montana Nebraska New Mexico North Dakota South Dakota ;

841 • 1,226

7 564 75

748 928 57

715

921 1,365

39 1,070

883 1,482

14 1,284

857 1,361

8 1,573

829 1,776

15 1,820

Texas Utah ! Wyoming : Total :

33 536 634

7,867

618 520 662

8,005

575 479 955

10, 328

401 322 985^

9,996

349 296 982

10,406

440 353

1,060 12,404

Eastern: : Illinois : 30 17 . - ._ — _ >. M •• _

Michigan : New York :

943 1,136 95

1 913 1,524 1,453 1,755

Ohio : Wisconsin :

328 54

1,355

607 735 375 519 111

Total : 1,855 2,648 1,899 1,972 2,532

Total for beet : regions : 16,618 20,470 25,320 24,569 22.291 29,702

1/ Preliminary data. Source: ASCS, ÁMS, and SRS.

91

Appendix table 10--Acreage planted for sugar beets

Area planted In crop year-- Region and State : 1960 : 1965 : 1970 : 1973 ; 1974 : 1975 1/

1,000 acres Far West: : Arizona : — — 14.4 11.2 15.4 18.0

California : 214.9 312.7 291.4 280.5 238.2 331.2

Idaho : 97.6 159.7 175.1 154.9 92.0 168.7

Nevada : .6 2.2 — -Í-- --- --_

Oregon : Washington :

20.9 19.0 22.2 19.2 11.6 18.3 37.9 56.8 67.2 96.9 64.5 83.9

Total : 371.9 550.4 570.3 562.7 421.7 620.1

Central: : Colorado : 157.1 156.5 159.0 122.8 128.4 162.7

Iowa : 1.4 2.8 1.9 — — - —

Kansas : 9.2 20.8 45.3 34.7 35.4 46.0

Minnesota : 81.2 124.1 155.6 132.1 187.9 225.0 Missouri — — .2 --•

Montana 61.6 62.2 58.0 45.9 44.5 48.7 Nebraska 69.3 71.9 85.2 79.4 80.7 98.0

New Mexico .8 2.6 2.5 .8 .3 .9 North Dakota . 42.6 67.0 94.9 80.1 145.0 139.6 South Dakota 6.8 ; — —

Texas 1.8 28.7 30.8 23.3 21.6 37.2 Utah . 32.9 33.1 31.7 19.3 17,5 23.2 Wyoming . 42.4 55.0 61.2 55.8 54.5 58.3 Total : 507.1 624.7 726.3 594.2 715.8 839.6

Eastern: Illinois : 1.6 .8 — --- — —

Indiana 2/ — --- . ---

Michigan : 69.4 79.6 93.0 89.1 82.5 93.6 New York — 20.4 >■ —-

..-, — —

Ohio : 23.2 32.4 41.0 31.1 33.3 39.9 Wisconsin : 6.2

: 100.4

..__ .--- —

Total 133.2 134.0 120.2 115.8 133.5

Total for beet regions : 979.4 1,308.3 1,430.6 1,277.1 1,253.3 1,593.2

1/ Preliminary data. 2/ Less than 50 acres. Source: ASCS, AMS, and SRS.

92

Appendix table ll--Average sugar beet planted acreage for each farm II

Region and State Average planted acreage per farm in--

1960 1965 1970 1973 1974

Far West: Arizona California Idaho Nevada Oregon Washington Average

Central: Colorado Iowa Kansas Minnesota Missouri Montana Nebraska New Mexico North Dakota South Dakota Texas Utah Wyoming Average

Eastern: Illinois Michigan New York OWo Wisconsin ■' Average

Total for beet regions

45.0

37.1 59.4 69.5 87.3

47.9 40.7 81.6 73.2 53.7 38.2 17.7 42.2 42.6

20.6 23.9

25.0 19.4 23.8

40,4

74.1

50.5 84.5 104.5 96.7

61.6 49.2 63.4 74.7

66.1 25.4 63.7 58.8

25.8 29.8 26.4 29.7

"2971

57.8

Acres

160.0 249.7 211.0 80.1 140.2 197.7 224.1 209.5 23.5 44.3 72.5 80.7 63.2 55.7 122.2 ___ --_ 37.1 49.6 81.0 79.5 62.0 32,6 47.8 78.6 109.1 100.0

111.6

89.0

129.5

79.3 90.3 111.8 --- 193.6 228.6 131.4 161.5 40.0

72.4 80.5 72.4 82.3 71.4 110.6

117.0 139.6

99.0 122.7 36.3 43.0 86.2 97.0

105.0

42.9 49.7

42.3 48.7 — _^_

42.7 49.4

87.0 102.7

120.6

88.2

222.6 188.8

82.9 79.0 75.0

179.9

110.2 39.8 100.9 116.3

50.8

48 v4

~50

104.8

If Appendix table 8 gives the number of farms from which these averages were made. Data for 1975 are not available.

Source: Derived from appendix tables 8 and 10.

93

Appendix table 12--Yield of sugar beets per harvested acre

Average yield per acre in— Region and State : 1960 ; 1965 ; 1970 ; 1973 : 1974 : 1975 1/

Tons

Far West: Arizona : — 19.0 23,8 21.6 21.5 California : 20,8 19.8 25.8 25.0 25.0 27.2 Idaho : 18.3 18,0 18.4 20.2 20.4 18.6 Nevada : 14.4 15.9 — -__ •

---

Oregon : 23.1 24.1 21.0 26.0 22.9 23.8 Washington : 20.8 24.4 19.4 27.0 24,5 26.0 Average : 20.3 19.9 22.5 24.0 23.8 24.5

Central: Colorado ': 17.8 15.1 16.4 16.3 18.0 17.2 Iowa : 12.8 11.9 13.7 -.- --• - -r.

Kansas : 17.1 17.1 16.1 17.8 17.1 15.5 Minnesota : 12.6 10.9 12.0 16.5 11.4 14.2 Missouri : -__ 8.8 .-_ --- ..• Montana : 13.9 12.4 16.2 19.8 19.5 17.1 Nebraska : 17.8 14.0 17.4 19.9 18.2 18.5 New Mexico : 11.0 21.9 16.5 18.7 20.1 16.7 North Dakota : 13.3 10.7 11,5 16.2 11,2 13.9 South Dakota 12.1 -__ ___ _ ^. Texas : 18.8 22.0 20.0 19.4 17,7 13.1 Utah 17.0 16.2 16.4 17.5 17.5 15,7 Wyoming • 15.3 12.4 16.2 18.2 18.4 18.4 Average : 15.7 13.6 15.0 17.5 15.0 15.8

Eastern: Illinois 18.8 21.2 -.-. . ' . Michigan : 13.9 16.4 21.3 17.6 18.0 19.2 New York : 5.9 . » - - -- Ohio : 14.6 20.2 18.8 12.7 15.9 19.8 Wisconsin 9.3

13.9 _»_

Average : 16.0 20.5 16.3 17.4 19.4

rotal for beet : regions 17.3 16.5 18.5 20.2 18,2 19,6

1/ Preliminary data. Source: ÁSCS, AMS, and SRS»

94

Appendix table 13--Sugarcane: Number of farms, area harvested, total production, and yield per acre for selected years during 1960-75

Region ; and • year •

Number of farms

Area harvested for sugar

Total production

: Yield per

harvested : acre

1,000 acres 1,000 tons Tons

Florida: : 1960 : 13 48.9 1,554 31.8 1965 : 178 185.4 5,505 29.7 1970 : 135 170.0 5,671 33.4 1973 : 136 257.6 8,119 31.5 1974 : 135 258.4 7,482 29.0 1975 1/ ; 2/ 287.5 10,116 35.2

Louisiana: 1960 ! 2,547 255.4 5,583 21.9 1965 2,218 288.3 6,542 22.7 1970 1,589 265.7 6,927 26.1 1973 1,290 318.9 6,570 20.6 1974 1,180 308.0 6,558 21.3 1975 1/ 2/ 308.0 6,488 21.1

Texas: 1973 91 18.1 620 34.3 1974 96 27.6 901 32.7 1975 1/ 2/ 35.0 1,250 35.7

Hawaii: 1960 ; 681 103.6 8,613 83.1 1965 578 109.6 10,738 98.0 1970 504 113.8 10,457 91.9 1973 : 393 108.2 9,645 89.1 1974 339 95.8 9,083 94.8 1975 1/ : 2/ 105.1 9^485 90.2

Puerto Rico: 1960 ! 14,973 328.0 10,001 30.5 1965 : 10,770 287.6 8,807 30.6 1970 : 5,565 187.8 5,891 31.4 1973 : 2,954 132.1 3,621 27.4 1974 : 2,551 121.6 3,585 29.5 1975 1/ : 2/ 137.4 3,520 25.6

Total all areas 1960 ! 18,214 735,9 25,751 35.0 1965 : 13,744 870.9 31,592 36.3 1970 : 7,793 738.3 28,946 39.2 1973 : 4,864 834.9 28,575 34.2 1974 : 4,301 811.4 27,609 34.0 1975 1/ : 2/ 873.0 30.859 35.3 1/ Preliminary data. 2/ Data not available. Source: ASCS, ÁMS,and SRS, 95

Appendix table 14~Primary distribution

1./ rncludes N.J., N.Y., and Pa. 2_/ Ineludes Conn., Me., Mass*, EH., R.I., and Vt. 3_/ Includes Ala., Ark., D.C., Del., Fla., Ga., Ky.

Tenn., Tex., Va. and W.Va. kj Ineludes Ind., Mich., Ohio, and Wis * 5j Includes la., Kans., Minn., Mo ., N.D,, Nebr., and S 6^/ Ineludes Alaska, Ariz., Colo, Hawaii, Idaho, Mont.,

and Wyo.

em and ;ndar year:

: Northeast region South

region

: North-central region It , Middle :

Atlantic : Other States : Total: : East north-central States

calé : Other States : _ ¡States 1/: V 11 .Illinois : 4/

. TotaJ.

1,000

Beet sugar: 1960 431 30 461 1,699 8,537 7,046 15,583 1965 730 33 763 2,721 14,069 10,711 24,780 1970 735 259 994 2,334 16,692 11,684 28,376 1973 1,103 34 1,137 2,842 15,460 13,979 29,439 1974 419 30 449 2,021 12,300 9,775 22,075 1975 7/ 2,565 293 2,858 2,859 13,932 12,282 26,214

Cane sugar: 1960 37,657 17,647 55,304 39,424 8,394 16,034 24,428 1965 , 37,115 18,939 56,054 39,446 7,672 14,742 22,414 1970 • 40,265 20,108 60,373 44,467 9,023 18,314 27,337 1973 38,867 19,863 58,730 47,110 8,455 19,175 27,630 1974 ! 37.714 19,853 57,567 45,522 12,382 22,153 34,535 1975 : 29,549 17,340 46,889 40,985 7,427 15,765 23,192

Total beet and , eane sugar 1960 : 38,088 17,677 55,765 41,123 16,931 23,080 40,011 1965 ! 37,845 18,972 56,817 ■42,167 21,741 25,453 47,194 1970 : 41,000 20,367 61,367 46,801 25,715 29,998 55,713 1973 : 39,970 19,897 59,867 49,952 23,915 33,154 57,069 1974 : 38,133 19,883 58,016 47,543 24,682 31,928 56,610 1975 : 32,114 17,633 49,747 43,844 21,359 28,047 49,406

La., Miss,, N.C., Okla., S.G.

Nev. N. Mex,, Oreg., Utah,

96

of sugar in the United States

North-central region—'Gon. West region Total

United West * Other States

north-central : Total California : ^^

: Total States States 5/

hundredweight

7,966 23,549 9,297 5*479 14,776 40,485 9,220 34,000 12,908 6,178 19,086 56,570

10,036 38,412 17,101 8,014 25,115 66,855 10,046 39,485 14,255 7,921 22,176 65,640 9,167 31,242 14,589 8,243 22,832 56,544 8,488 34,702 14,378 6,221 20,599 61,018

4,735 29,163 7,125 3,218 10,343 134,234 4,343 26,757 6,996 3,095 10,091 132,348 5,396 32,733 6,115 2,799 8,914 146,487 6,103 33,733 7,593 . 3,405 10,998 150,571 6,313 40,848 7,958 3,140 11,098 155,035 5,461 28,653 6,688 3,156 9:^844 126,371

12,701 52,712 16,422 8,697 25,119 174,719 13,563 60,757 19,904 9,273 29,177 188,918 15,432 71,145 23,216 10,813 34,029 213,342 16,149 73,218 21,848 11,326 33,174 216,211 15,480 72,090 22,547 11,432 33,979 211,628 13,949 63,355 21,066 9,377 30,443 187,389

Ij Includes 5,958,859 hundredweight that are classified as unspecified. Unspecified deliveries have been proportionately distributed, that is, their distribution is typical of the distribution of other deliveries.

Sources Sugar Report, ASCS; Sugar Market News. AMS; and Sugar and Sweetener Report. AMS and ERS.

97

Appendix table 15--Deliveries of sugar by type of product 1^/

00

•Canned, bottled. : Total Bakery, . Confectionery : Ice cream ■ : frozen foods. Multiple : deliver-

Year . cereal, and : and related : and dairy Beverages jams, jellies, and all other Nonfood : ies by

related products : products preserves, and food uses proaucts. ^ype of products so forth : t^roduet

1,000 hundredweight

1960 : 20,954 16,077 7,313 22.970 15,808 5,938 1,292 90,352 1961 . 21,547 16,846 7,897 24,202 17,107 5,251 1,585 94,435 1962 : 22,411 17,252 7,957 26,432 16,930 5,349 1,581 97,912 1963 ■ 23,410 17,872 8,720 28,703 17,269 5,255 1,384 102,613 1964 : 21,634 17,300 8,763 28,010 17,066 7,171 1,224 101,168 1965 • 23,122 19,176 9;035 31,190 16,760 9,024 1,118 109,425 1966 • 24,690 20,002 9,667 34,797 17,551 8,826 1,503 117,036 1967 25,717 20,086 9,713 35,704 16,856 8,490 1,315 117,881 1Í68 27,925 21,703 10,311 40,493 18,455 9,413 1,435 129,735 1969 - . 26,881 20,744 10,158 41,981 18,324 8,831 1,442 128,761 1970 : 28,397 21,951 10,746 47,128 19,370 8,655 1,675 137,922 1971 27,222 21,130 11,224 47,297 20,543 9,860 1,855 139,131 1972 : 28,988 21,139 11,986 48,739 19,738 10,158 1,811 142,559 1973 . 29,074 20,704 11,901 49,387 20,496 10,040 2,221 143,823 1974 28,856 20,374 11,404 46,992 18,981 10,278 2,557 139,442 1975 . : 2/23,757 2/15,334 ^,755 2/40,390 14,045 2/9,359 2/1,679 2/114,319

1/ Total deliveries are given in appendix table 15. 2/ Excludes unspecified deliveries.

Source: Sugar Reports, ASCS, and Sugar Market News, AMS,

Appendix table 16--Deliveries of sugar by business of buyer

: :A11 other Total • :Wholesale : deliveries. •Total :Total deliveries

Year : deliveries by type

;Hotels, ]restaurants, * and

: grocers, : jobbers, and

1Retail grocers 'chain stores,

and

': including : deliveries to

deliveries by business

:by type of ¡product or

of product l/;institutions : sugar dealers supermarkets .Government of buyer :business of : tagendes :buyer 1/

1,000 hundredweight

1960 : 90,352 1,307 50,591 24,454 1,755 78,107 168,459 1961 94,435 1,365 51,233 26,365 2,100 81,063 175,498 1962 97,912 1,301 50,835 25,458 2,117 79,711 177,623 1963 Î 102,613 1,321 50,679 25,273 2,863 80,136 182,749 1964 : 101,168 1,382 47,438 24,111 2,685 75,616 176,784 1965 : 109,425 1,448 46,049 23,841 2,907 74,245 183 670 1966 : 117,036 1,521 45,688 24,013 2,213 73,435 190,471 1967 : 117,881 1,640 43,525 23,760 2,948 71,873 189,754 1968 : 129,735 1,711 44,152 24,490 2,033 72,386 202,121 1969 : 128,761 1,846 41,225 23,864 1,977 68,912 197,673 1970 : 137,922 1,801 44,124 26,599 1,976 74,500 212,422 1971 : 139,131 1,588 43,110 26,482 1,893 73,073 212,204 1972 : 142,559 1,693 42,057 26,324 1,757 71,831 214,390 1973 : 143,823 1,879 41,268 26,325 2,125 71,597 215,420 1974 : 139,442 1,811 40,043 27,071 2,421 71.346 210,788 1975 2M4,319 2/1,423 2/37,089 2/24,626 2/1,640 2/64,778 3/185,453

1/ See appendix table 14 for detail. 2/ Excludes unspecified deliveries. 3/ Includes 6,355,736 hundredwaiq^tt that are classified as unspecified.

Source: Sugar Reports, ASCS, and Sugar Market Nex^s, AMS.

Appendix table 17--Sugar cane refiners and beet processing companies ranked Hy assets and rates of return on stockholders' investment after taxes

o o

Company

Amalgamated Sugar Co, American Crystal Sugar Co. American Sugar Co. Amstar Corporation Central Aguirre Sugar Co. Great Western Su^ar Co. Holly Sugar Corporation National Sugar Refining Co. Savannah Sugar Refining Corporation Sav^nn^h Food and Industries Inc, South Puerto Rico Sugar Company Sucrest Corporation Ij United States Sugar Corporation' Utah-Idaho Sugar Company

Companies ranked 1 to 4 Companies ranked 5 to 8 Companies ranked 9 to 12

Total 8 companies Total 12 companies

1960

Rank : Pet

8 5 1

12 2 7 3 9

4 10 11 6

1965

Rank : Pet

1970

Rank : Pet

1971

Rank : Pet

1972

Rank : Pet

1973

Rank : Pet.

1974 1/

Rank : Pet

1975 XI

Rank : Pet

12.0 3.8 6.8

4,3 9.1 8.3 2.4

15.6

4.3 8.0

17.6 7.3

6.5 7.2

11.4

7.4

7 4 1

12 2 5 9

10

3 11 8 6

13.0 4.5

12.6

1.5 10.6 9.5 7.0

12.6

(1.4) 10.6 15.4 11.0

8.0 12.3 7.6

9.2

3 5/

9.5 5.0

9.3

2.7 1.1

13.8

6.6 10.7 7.8

7.3 9,5 9,1

8.2

9.8

13.1

3 5.1 7 6/( .3)

6 12.6

8 7.7 5 12.7 2 5.7

10.3 9.5

10.0

10.2

9.7

5.9 (3.1)

10.8

4.5 10.7 2.4

8.2 7.4

7.9

11.4 2/ NA 28.5 NA 11.3

8.4

11.2 1.2

8-8

7 (7.4) 4 22.9 2 8.4

11.7 6.3

10.1

NA 16.4 NA 3/15.7

NA 4/34.7 NA NA NA (3.6) NA NA

(43.5) NA

NA (114.1) NA NA 41.3 NA NA NA NA

NA

3/24.6 8^/14.1

NA

1/ Estimated by ERS. _2/ NA = not available, '^| Two quarters. hj Three quarters. 5^/ Ranks are not shown if they would disclose the approximate size of unregistered companies, 6^/ Parenthesis ( ) denote loss. 7^/ Formerly Americail Molasses Company.

Source: 1960-72,

Report of Federal Trade Commission on Rates of Return in Selected Manufacturing Industries. Various issues during

Appendix table 18--Centrifugal sugar production, raw value, by region and country \[

Region and country Average 1966/67-1970/71 1971/72: 1972/73 1973/74 1974/75 1975/76 2/

1,000 metric tons

North America: Bahamas 7 0 0 0 0 0 Barbados 160 113 118 110 98 109 Belize 62 71 72 90 89 75 Canada 130 149 146 114 101 128 ^osta Rica 137 179 174 164 178 191 Cuba 5,959 4 ,388 5 ,250 5 ,800 5 ,700 5 ,700 Domincan Republic 889 1 ,139 1 ,142 1 ,194 1 ,135 1 ,179 El Salvador 129 185 188 232 257 258 Guadeloupe 149 80 121 97 107 105 Cuaternala 179 235 270 325 384 450 Haiti 57 64 65 65 58 56 Honduras 54 62 59 73 77 82 Jamaica 413 384 331 383 366 345 Martinique 34 22 23 14 14 20 Mexico 2,442 2 ,520 2 ,770 2 ,835 2 ,725 2 ,750 Nicaragua 129 166 142 160 196 238 Panama : 73 87 85 108 136 163 St. Kitts 33 26 24 27 26 31 Trinidad-Tobago 224 232 187 187 163 218

United States: Continental (Beet) 2,873 3 ,186 3 ,323 2 ,900 2 ,727 3 ,484 Continental (Cane) 1,127 1 ,094 1 ,470 1 ,288 1 ,334 1 ,573 Hawaii 1,098 1 ,015 1 ,024 944 1 ,002 1 ,039 Puerto Rico : 495 270 231 263 272 268 Virgin Islands : 0 0 0 0 0 0

Total ! 16,853 15 ,667 17 ,215 17 ,373 17 ,145 18 ,462

South America: Argentina \ 914 991 1 ,294 1 ,650 1 ,532 1 ,349 Bolivia 99 118 123 174 175 180 Brazil 4,579 5 ,649 6 ,164 6 ,960 7 ,400 6 ,300 Chile 173 173 153 127 220 330 Colombia 655 790 815 850 908 989 Ecuador 201 250 249 245 268 288 Guyana : 346 319 270 346 305 366 Paraguay : 45 55 56 73 81 84 Peru : 772 921 920 1 ,021 990 970 Surinam 16 11 9 10 10 10 Uruguay : 50 58 75 77 112 129 Venezuela 413 517 518 578 515 482

Total : 8,263 9 ,852 10 ,646 12 ,111 12 ,516 11 ,477

See footnotes at end of table, Continued

101

Appendix table 18--Centrifugal sugar production, raw value, by region and counury 1/ --Continued

R«|ional and country .n.^T^^^?n-,rv/-7,'1971/72 "igyZ/TS'1973/74*1974/75-1975/76 2/ 1966/67-197 Q/71; i ; : ; ~

Vi»|ptern Eurcïpe:

Belgium-Luxembourg : 584 D«mMrk : 312 France : 2,257 Geonamy, West : 2,014 Irelend : 144 Italy : 1,384 Netherlands : 705 United Kingdom : 961

T»tal EC : 8,363

Austria : 318 FlnUnd : 57 Greece t 133 Portugal (Aaores & Madeira) 22 l>«in : 702 àitedTO : 240 Switaerland : 65

Total

Etfter» Europe: AUania Stil gar 1« Caechoàlovakia Gerwaîiy, East Hungary Foland Ecñnania Yutoilivia

Total : 4,636

Total Europe (except USSR) : 14,536 Total USSR : 9,477 Afric*:

Egypt : 393 Ethtc^ia : 81 Kenya : 95 îfelagasy Reptiblic : 104 Mauritius : 618 Morocco : 71 Mozambique ; 243 Reunion : 236 Rhodesia : 161 South Africa : 1,595

See footnotes at end of table.

9,899

16 252 848 537 418

1,667 437 461

1,000 metric tons

841 325

3,202 2,344

182 1,240

837 1,180

688 342

2,984 2,440

169 1,253

756 963

785 367

3,168 2,456

189 1,134

832 1,047

620 423

2,948 2,438

143 1,010

777 618

10 151 9,595 9,978 8,977

295 388 370 397 63 88 85 76

154 129 161 187 18 23 25 24

971 830 816 598 267 292 264 305 76 67 78 72

11,995 11,412 11,777 10,636

15 249 700 520 280

1,712 445 421

19 230 779 720 330

1,829 577 427

19 265 859 705 326

1,817 683 483

20 235 850 700 340

1,557 561 554

4,342 4,911 5,157 4,817

454 130 127 110 624 223 324 182 175

1,865

590 144 101 110 686 223 365 227 200

1;915

597 150 160 115 697 248 390 251 248

1,732

540 160 175 110 696 290 400 239 250

1,883

710 482

3,231 2,533

199 1,402

914 695

10,166

500 77

307 25

924 277 65

12,341

21 250 750 650 490

1,950 560 489

5,160

16,337 16,323 16,934 15,453 17,501 7,995 8,150 9,570 7,730 7,700

620 165 177 115 496 350 243 246 265 ,802

Continued-—

102

Appendix table 18--Centrifugal sugar production, raw value, by region and country \j - Continued

Region and country \ Average :

1966/67-1970/71: 1971/72 1972/73 1973/74; 1974/75 1975/76 2/

1, ,000 metric tons

Swaziland : 154 188 171 190 200 235 Tanzania : 87 90 92 106 110 112 Uganda : 150 141 89 55 27 30

Zaire ''Congo, K) : 39 50 57 61 64 68

Other 3/ : 415 467 475 480 544 617

Total : 4,443 5,150 5,445 5,480 5,688 5,541

Asia: : Buma : 89 115 120 100 110 110

China, Peoples Rep : 1,755 1,919 2,457 2,630 2,400 2,500

China, Rep of (Taiwan) : 778 746 780 892 751 860

India 4/ : 3,857 3,830 4,572 4,950 5,794 5,500

Indonesia 687 680 890 950 1,000 1,050

Iran 490 580 625 666 645 685

Japan 404 580 650 653 478 477 Nansei-Nanpo (Ryukyu) 224 136 5/ 5/ 5/ 5/

Pakistan 541 356 470 636 557 615 Philippines 1,747 1,870 2,425 2,515 2,465 2,800

Thailand 357 630 650 930 1,036 1,390

Turkey : 677 910 811 736 834 986

Other 6/ : 111 167 182 321 322 334

Total

Oceania: Australia Fiji

Total

World total

11,719 12,520 14,632 15,979 16,392 17,307

2,439 2,735 2,735 2,652 2,927 2,960 372 341 375 350 360. 370

2,811 3,076 3,110 3,002 3,287 3,330

68,102 70,596 75,521 80,449 78,211 81,318

NOTE: Columns may not add to regional total because of rounding. \J Years shown are crop year of the crop-harvesting season. For chronological

arrangement, all campaigns which begin not earlier than May of one year, nor later than April of the following year, are placed in the same crop-harvesting year. The entire season's production of each country is credited to the May/April year in which harvesting and sugar production began. Refined beet sugar is generally converted to raw value by multiplying by 1.087, and refined cane sugar is multiplied by 1.07 to obtain the raw value equivalent. 2_/ Preliminary. _3/ Other Africa includes Afars- Issas, Algeria, Angola, Cameroon, Congo (Brazzaville), Ghana, Liberia, Malawi, Nigeria, Somali Republic, Sudan, Tunisia, and Zambia. M Includes Khandsari. Sj Since January 1, 1972, included in Japan. 6^/ Other Asia includes Afghanistan,, Iraq, Israel, Lebanon, Nepal, South Korea, Vietnam, Sri Lanka, and Syria. Bangladesh is included in Other Asia beginning in 1971/72.

Source: FAS prepared or estimated this data on the basis of official statistics of foreign governments, other foreign source material, reports of U.S. Agricultural Attaches and Foreign Service Officers, results of office research, and related data.

103

Appendix table 19--World per capita consuiiiptioñof centrlfgual sugar for major regípns and countries

Region and country

Per cap^tia consumption in-

1969 1972 1974

Kilograms, raw value 1/

Europe^ European Economic GonDaunity Poland U.5.S.R.

North America : Canada ÜVS.A.

Central America: Cuba Haiti Mexico

South America: Bra-zil Paraguay

Asia: Eurma China (îrainland) India Iran Japan

Africa: Gameroon Egypt, Arab Rep. of Ghana Kenya Soutli A.f rica Sudan

Oceania: Australia

World average

38.5 40.0 40.2 41.4 40.9 45.5 43.0 44.6 46.0 41.1 43.4 44.6

48.6 49.8 47.6 50.9 47,0 43.8 48,4 50.1 48.0

39.0 37.7 40.3 76.3 53.8 57.4 8.8 9.5 11.8

39.7 40.1 41.7

34.5 38.6 39.3 37.5 41,8 42.5 20.1 21.5 23.9

7.5 8,5 8,5 3.2 3,5 2.6 4.0 4.5 4.8 5.9 7.0 6.5

24.4 28.5 27.5 25.6 30.4 30.4

11.2 12.6 12.7 3.0 3.8 4.8

15.6 16.6 17.0 9,7 9.9 5,5

14.1 17.4 18.8 38,5 40.2 41.5 14.4 ; 15.8 15.6

48.0 47,8 50.1 57.1 55,3 57.4

19.3 20.4 20.3

1/ 1 kilograiii equals 2.2046 pounds.

Source: Sugar Yearbook 1974, International Sugar Org.

104

Appexndix table 20—Louisiana cane sugar sold at retail in Chicago: Prices and marketing spreads

Prices ; Marketing price spreads for — Farm value and marketing spre a percentage of the retail

îads as

1 Farm ' value

: in [ Louisiana

: Raw sugar in

Wholesale in

Retail In

: : Farm to : raw sugar . Wholesale

Distributors and

Drice

Year and month Farm

Raw sugar [ mill

spread

Wholesale Distributors

and » Louisiana

1/ Chicago 2/ " Chicago : miU retailers • value spread retailers

spread

Cf^r Its per pound - _-_ -o^^^^^-u _ Hê£ £:<sí\. *

1973: : Januaiy I 6.3 9.7 12.7 Xk.k 3.k 3.0 1.7 43,8 23.6 20.8 11.8 February : 6.2 10.0 12.7 1Í+.5 3.8 2.7 1.8 42.8 26.2 18.6 12.4 March : 6.1 9.7 12.5 lh,6 3.6 2.8 2.1 41.8 24.6 19-2 14.4 April 6.3 10.0 22.5 IÍÍ.9 3.7 2.5 2.4 42.3 24.8 16.8 16.1 May : 6.1 10.it 12.9 15.0 k.3 2.5 2.1 40.6 28.7 16.7 14.0 June 6.7 10.7 13.3 15.1 k.Q 2.6 1.8 44.4 26.5 17.2 11.9 July : 6.8 11.0 13.Í+ 15.2 k.2 2.4 1.8 44.7 27.6 15.8 11.9 August : 6.7 10.8 13.2 15.2 4.1 2.4 2.0 44.1 27.0 15.8 13.1 September : 7.1 11.u 12.9 15.3 4.3 1.5 2.4 46.4 28.1 9.8 15.7 October 7.3 11.8 lii.5 15.9 4.5 2.7 1.4 45.9 28.3 17.0 8.8 Uoveinber : 7.if 11.9 IÍ+.7 16.8 4.5 2.8 2.1 44.0 26.8 16.7 12.5 Deceniber : 7.3 11.8 lii.7 17.0 4.5 2.9 2.3 42.9 26.5 17.1 13.5 Weighted average 6.7 10.8 13.if I5.ÍÍ 4.1 2.6 2.0 43.5 26.6 16.9 13.0

197ÍJ-: January 7.4 12.2 1U.9 17.0 4.8 2.7 2.1 43.5 28.2 15.9 . 12.4 February- : 7.6 13.0 16.3 18.0 5.4 3.3 1.7 42.2 30.0 18.3 9.5 March 11.0 16.6 22.5 20.2 5.6 5.9 -2.3 54.5 27.7 29.2 -11.4 April 11.1 20.3 21.5 22.6 9.2 1.2 1.1 49.1 40.7 5.3 4.9 May 12.0 19.3 23.7 2U.Í+ 7.3 4.4 .7 49.2 29.9 18.0 2.9 June lk,k 2U.3 27.8 28.2 9.9 3.5 .4 51.1 35.1 12.4 1.4 July 17.0 28.9 32.0 31.8 11.9 3.1 -.2 53.5 37.4 9.7 -.6 August 16.9 29.4 33.2 35.8 12.5 3.8 2.6 47.2 34.9 10.6 7.3 September 19.8 33.7 36.2 38.0 13.9 2.5 1.8 52.1 36.6 6,6 4.7 October 20.7 35.8 38.9 i+0.5 15.1 3.1 1.6 51.1 37.3 7.7 3.9 November 23.2 39.6 47.1 U7.3 16.4 7.5 .2 49.0 34.7 15.9 .4 December 35.9 66,9 68,5 59.9 31.0 1.6 -8.6 59.9 51.8 2.7 -14.4 Weighted average 15.5 26.6 30.2 30.6 11.1 3.6 .4 50.6 36.3 11.8 1.3

1975 : January 27.2 ks.o 57.5 57.6 18.8 11.5 .1 47.2 32.6 20.0 .2 February 2U.9 Uo.i 53.0 50.7 15.2 12.9 -2.3 49.1 30.0 25.4 -4.5 March 2U.9 ill.2 52.0 h2,& 16.3 10.8 -9.2 58.2 38.1 25.2 -21.5 April 19*4 30.7 32.9 39.8 11.3 2,2 6.9 48.8 28.4 5.5 17.3 May 18.2 30.2 32.9 33.9 12.0 2,7 1.0 53.7 35.4 8.0 2.9 June 11.9 20.9 26,k 31.2 9.0 5.5 4.8 38.1 28.8 17.6 15.4 July ; 9.8 15.9 20.9 27.6 6.1 5.0 6.7 35.5 22.1 18.1 24.3 Aiagust : 12.6 21.0 26.4 29.1 8.4 5.4 2.7 43.3 28.9 18.6 9.3 September : 15.2 2it.2 29.4 31.8 9.0 5.2 2.4 47.8 28.3 16.4 7.5 October 11.U 18.8 27.k 30.9 7.4 8.6 3.5 36.9 23.9 27.8 11.3 November : 9.6 X6,k 22.2 27.8 6.8 5.8 5-6 34,5 24.5 20.9 20.1 December 9.2 15.8 21.5 26.5 6.6 5.7 5.0 34.7 24.9 21.5 18.9

Weighted average : 15.7 25.9 32.5 35.0 10.2 6,6 2.5 43.5 28.5 18,8 9.2

1/ Adjusted for refining loss, 2/ These are offerings of sxigar distributors. Delivered prices may differ from these figures.

Appendix table 21—Florida cane sugar sold in Atlanta: Erices and marketing spreads

Í Prices. Marketing ; price spreads for — Farm value and : a percentage

marketing S] of the retai

preads as

Farm value

Î in ; Florida

Raw sugar in

Wholesale : in :

Retail in

Farm to raw sugar Wholesale

Distributors and

1 price

Year and month : ; Fann ^^^^.^.^^^iwhclesale;'

Distributors and

New York l/ Atlanta 2/ ¡ Atlanta mill retailers : value Î

spread : spread : : :

retailers spread

• 1/1 ^^ ^-. „__ pQ-vr>û-n-l-. -----

1973 :

^.^S^^ (^^^X^

JanuaiT ': 5.6 9.9 ll+.O 1I+.3 1+.3 l+.l 0.3 39.1 30.1 28.7 . 2.1 February- . 5.8 10.0 ll+.O II+.I+ U.2 l+.O .1+ 1+0.3 29.1 27.8 2,8 March : 5.7 9.7 ll+.O 1I+.5 l+.O h.3 .5 39.3 27.6 29.7 3.Í+ April 5.9 10,0 ll+.O Xh,5 l+.l l+,0 .5 1+0.7 28.3 27.6 3.Í+ May 6.1 10.1+ 11+.1+ II+.6 k,3 l+.O .2 U1.8 29.i+ 27.^ 1.1+ June 6.1+ 10.7 11+.1+ II+.9 h,3 3.7 .5 lf2.9 28.9 2I+.8 3.^ July : 6.U 11.0 11+.9 15.0 I+.6 3.9 .1 1+2.6 30.7 26.0 .7 August . 6.3 10.8 11+.9 15.1 U.5 l+.l .2 1+1.7 29.8 27.2 1.3 September 6.7 11.1+ 15.5 15.^ h.7 l+.l -.1 U3.5 30.5 26.6 -.6 . October 6,8 11.8 15.8 16.1 5.0 l+.O .3 1+2.2 31.1 2Í+.8 1.9 November 7.0 11.9 16.0 16.2 Í+.9 l+.l .2 1+3.2 30.3 25.3 1.2 December 6.9 11.9 16.3 16.5 5.0 1+.1+ .3 1+1.8 30.3 26.7 1.2

Weighted average 6.3 10.8 1I+.8 15.1 h.^ l+.O .3 1+1.7 29.8 26.5 2.0

I97Í+: January 7.1 12.2 16.6 17.3 5.1 1+.1+ .7 1+1.1 29.5 25.i+ l+.O February 7.2 13.0 17.9 18.7 5.8 ^.9 .8 38.5 31.0 26.2 h.3 March : 10.1+ 19.3 22.0 22,1 8.9 2.7 .1 ^7.1 ^0.3 02.2 .1+ April 10.6 20.3 22.6 2I+.9 9.7 2.3 2.3 1+2.6 39.0 9.2 9.2 May • 11,u 19.3 23.7 25.9 7.9 1+.1+ 2.2 l+l+.O 30.5 17.0 8.5 June • 13.6 21+.3 28.8 26.9 10.7 h.5 -1.9 50.6 39.8 16.7 -7.1 July 15.8 28.9 32.2 30.5 13-1 3.3 -1.7 51.8 1+3.0 10.8 -5.6 August 15.8 29.V 33.2 36.6 13.6 3.8 3.1+ 1+3.2 37.1 10.1+ 9.3 September 18.8 33.7 36.2 1+0.3 1I+.9 2.5 l+.l k6.6 37.0 6.2 10.2 October 19.6 35.8 1+2.2 i^3.9 16.2 6.1^ 1.7 l+it.6 36.9 1I+.6 3.9 November 21,7 39.6 1+8.7 1+6,3 17.9 9.1 -2.1+ 1+6,9 38.7 19.6 -5.2 Decetober • 3I+.0 66.9 7^.7 61+.9 32.9 7.8 ^9.8 52.1+ 50.7 12.0 -15.1

Weighted average 1Í+.8 27.0 31.5 31.9 12.2 Í+.5 .1+ 1*6.1+ 38.2 ll+.l 1.3

1975: . January 25.8 1+6.0 61.9 66.1 20.2 15.9 1+.2 39.0 30.6 2I+.I 6.3 February 23.6 1+0.1 57.3 61.7 16.5 17.2 1+.1+ 38.3 26.7 27.9 7.1 March 23.6 1+1,2 Í+7.5 55.6 17.6 6.3 8.1 1+2.5 31.6 11.3 1I+.6 April 18.U 30.7 39.1 1+8.8 12.3 8,1+ 9.7 37.7 25.2 17.2 19.9 May 17. U 30.1 37.1 1+1,2 12.7 7.0 l+.l 1+2.2 30.8 17.0 10.0 June 11.3 20.9 28.8 35.5 9,6 7.9 6.7 31.8 27.0 22.3 18.9 July 9>h 15.9 23.0 29.^ 6.5 7.1 6,k 32.0 22.1 21+.1 21.8 August 11.9 21.0 29.5 . 30.0 9.1 8.5 .5 39.7 30.3 28.3 1.7 Septeniber : 14.1+ 2l+,2 26.7 33.3 9.8 :2,5 6.6 1+3.2 29.^ 7.5 19.8 October : 10.9 18.9 2I+.I 31.7 8.0 5.2 1,6 3^.h 25.2 16.1+ 2I+.0 November : 9.2 16.5 22.3 30.1+ 7.3 5.8 8.1 30.3 2I+.0 19.1 26.6 December : 8,9 15.8 22.2 28.3 6.9 6.1+ 6.1 3l.i^ 2I+.I+ 22.6 21.6

Weighted average ; ;

1I+.7 25.^ 33.1 39.2 10.8 7.6 6.1 36.7 27.1 19.5 16.8

1/ Adjusted for refining loss, may differ from these figures.

Represents effective price at Savannah, Ga., refinery, 2/ These are offerings of sugar distributors. Delivered prices

Appendix table 22--Offshore cane sugar sold at retail in New York City: Prices and marketing spreads

: Prices Marketing price spreads for— Marketing percentage

spreads as a

Year •Raw sugar Wholesale Retail a of the retail price and ' in

[New York 1/ in

New York 2/ in

New York Wholesale Distributors and

retailers month Wholesale : Distributors and :retailers spread

spread ■

- Cents per pound ■--Percent

1973: January 9,9 14.3 14.3 4.4 0 30.8 0 February . 10.0 14.3 14.5 4.3 .2 29.7 1.4 March 9.7 14.3 14.7 4.6 .4 31.3 2.7 April 10.0 14.3 14.7 4.3 .4 29.3 2.7 May 10,4 14.7 15.0 4.3 .3 28,7 2.0 June 10.7 15.1 15.3 4.4 .2 28,8 1.3 July 11.0 15.3 15.5 4.3 ,2 27.7 1.3 August : 10.8 15.4 15,6 4.6 .2 29.5 1.3 September 11.4 15.6 16.1 4.2 ,5 26.1 3.1 October 11.8 15.9 16.4 4.1 .5 25.0 3.0 November 11.9 16.2 16.8 4.3 .6 25.6 3.6 December 11.9 16.4 17.2 4.5 .8 - 26.2 4,7 Weighted average 10.9 15.1 15.5 4.2 .4 27.1 2.6

1974: January 12.2 16.7 17,4 4.5 .7 25.9 4.0 February 13.0 17.0 17.9 4.0 .9 22.3 5.0 March 19.3 22.0 20.5 2.7 -1.5 13.2 -7.3 April 20.3 22.4 23.2 . 2.1 .8 9.1 3.4 May 19.3 23.5 25.1 4.2 1.6 16.7 6.4 June 24,3 28.8 28.5 4.5 -.3 15.8 -1.1 July 28.9 32.5 32.8 3.6 .3 11.0 .9 August 29.4 33.0 35.1 3.6 2.1 10.3 6.0 September 33.7 36.2 38.0 2.5 1.8 6,6 4.7 October 35.8 42.2 43.4 6.4 1.2 14.7 2.8 November 39.6 48.5 50.4 8.9 1.9 17.7 3.8 December 66.9 74.5 70.9 7.6 -3,6 10.7 -5a Weighted average : 26.5 30.8 31.5 4.3 .7 13.7 2.2

1975: January 46.0 61.9 62.2 15.9 ,3 25.6 .5 February 40.1 57.3 57.2 17.2 -.1 30.1 -.2 March 41.2 47.5 53.6 6.3 6.1 11.8 11.4 April 30.7 41.6 45,7 10.9 4.1 23.9 9.0 May 30.1 37.3 41.2 7.2 3.9 17.5 9.5 June 20.9 31.3 33.0 10.4 1.7 31.5 5.2 July 15.9 24.6 29.4 8.7 4.8 29.6 16.3 August 21.0 31.1 34.5 10.1 3.4 29.3 9.9 September 24.2 31.1 32.2 6.9 1.1 21.4 3.4 October : 18.9 27.1 31.5 8.2 4.4 26.0 14.0 November : 16.5 22.5 28.4 6.0 5.9 21.1 20,8 December 15.8 22.3 27.7 6.5 5.4 23.5 19.5 Weighted average 26.0 35.3 38.8 9.3 3.5 24.3 10.3

1/ Adjusted for refining loss. 2/ These are offerings of sugar distributors. Delivered prices may differ from these figures.

107

Appendix table 23--Beet sugar sold at retail in Chicago: Prices and marketing spreads

Prices Marketing price spreads for--

Farm value and n spreads as a perc

the retail i

larketing

Farm value in United

* Wholesale • in ' Chicago 1/

Retail in

Chicago

:entage of Year and

month Wholesale Distributors and retailers

>rice

Farm Wholesale Distri-

butors and States value : spread retailers

spread

«,«^ . j:ci.«^ciii.

1973: * January 6.3 12.5 14.4 6.2 1.9 43.7 43.1 13.2 February 6.2 12.4 14.5 6.2 2.1 42.8 42.8 14.4 March 6.2 12.3 14.6 6.1 2.3 42.5 41.8 15.7 April 6.2 12.3 14.9 6.1 2.6 41.6 40.9 17.5 May 6.3 12.6 15.0 6.3 2.4 42.0 42.0 16.0 June 6.4 13.0 15.1 6.6 2.1 42.4 43.7 13.9 July 6.6 13.3 15.2 6.7 1.9 43.4 44.1 12.5 August 6.4 13.3 Í5.2 6.9 1.9 42.1 45.4 12.5 September 6.4 12.7 • 15.3 6.3 2.6 41.8 41.2 17.0 October 7.3 14.3 15.9 7.0 1.6 45.9 44.0 10.1 November 7.4 14.3 16.8 6.9 2.5 44.0 41.1 14.9 December 7.4 14.5 17.0 7.1 2.5 43.5 41.8 14.7 Weighted average 6.6 13.2 15.4 6.6 2,2 42.9. 42.9 14.2

1974: Janujary 7.4 14.5 17.0 7.1 2.5 43.5 41.8 14.7 February 7.5 15.9 18.0 8.4 2.1 41.7 46.7 11.6 March 9.6 20,4 20.2 "10.8 -.2 47.5 53.5 -1.0 April 11.5 21.4 22.6 9.9 1.2 50.9 43.8 5.3 May 12.1 23.4 24.4 11.3 1.0 49.6 46.3 4.1 June 14.9 27.7 28.2 12.8 .5 52.8 45.4 1.8 July 17.2 31.8 31.8 14.6 0 54.1 45.9 0 August 17.1 32.4 J5.8 15.3 3.4: 47.S 42.7 9,5 September 18.8 35.2 38.0 16.4 2.8 49.5 43.1 7.4 October 20.0 35.6 40.5 15.6 4.9 49.4 38.5 12.1 November 23.1 42.0 47.3 18.9 5.3 48.8 40.0 11.2 December 30.4 62.2 59.9 31.8 -2.3 50.7 53.1 -3.8 Weighted average 15,9 30.2 32.3 14.3 2.1 49.2 44.3 6.5

1975: January 31.4 52.9 57.6 21.5 4.7 54,5 37.3 8.2 February 27.6 43.9 50.7 16.3 6.8 54.4 32.2 13.4 March 24.7 41.9 42.8 17.1 .9 57.9 40.0 1.1 April 21.4 32.7 39.8 11.3 7.1 53.8 28.4 17.8 May 18.0 32.7 33.9 14.7 1.2 53.1 43.4 3.5 June 14.1 26.2 31.2 12.1 5.0 45.2 38.8 16.0 July 12.2 20.7 27.6 8.5 6,9 44,2 30.8 25.D August 12.8 25.2 29.1 12.4 3.9 44.0 42.6 13.4 September 15.5 29.2 31.8 13.7 2.6 48.7 43.1 8.2 October 13.8 27.1 30.9 13.3 3.8 44.7 43.0 12.3 November . 11.7 21.6 27.8 9.9 6.2 42.1 35.6 22,3 December 10.4 21.1 26.5 10.7 5.4 39.2 40.4 20.4 Weighted average 16.8 29.8 34.4 13.0 4.5 47.9 38.1 14.0

1/ These are offerings of sugar distributors. Delivered prices may differ from these figures.

108

Appendix table 24--Beet sugar sold at retail in LOE > Angeles : Priceë and marketing spreads

: Prices Marketing orice ' Tiflyvn \7Q 1 11Û Qr\A «,ai-l^«4--i««

spreads for-- spreads as a nercentaee nf Year : Farm

¡value in

: United :States J./

Wholesale

in

Los Angeles 2/

Retail

in

Los Angeles 3/ Wholesa le

Dis

and tributors

retailer

the retail price and

month 'Farm Wholesale ■ Distri- butors and

value spread retailers spread

---.-....--- f üents per pounc — — - — - (^ 1 Percent

1973: January : 6.3 13.3 14.0 7.0 0.7 45.0 50,0 5.0 February : 6.2 13.3 14.2 7.1 .9 43.7 50.0 6.3

6.3 March : 6.2 13.3 14.2 7.1 .9 43.7 50.0 April : 6.2 13.3 14.2 7.1 .9 43.7 50.0 6.3 May : 6.3 13.4 14.2 7.1 .8 44.4 50.0 5.6 June : 6.4 14.0 14.5 7.6 .5 44.1 52.4 3.5 July- : 6.6 14.3 14.7 7.7 .4 44.9 52.4 2.7 August : 6.4 14.3 14.6 7.9 .3 43.8 54.1 2.1 September : 6.4 14.3 14.6 7.9 .3 43.8 54.1 2.1 October : 7.3 15.2 15.0 7.9 -.2 48.7 52.6 -1.3 November Î 7.4 15.3 16.3 7.9 1.0 45.4 48.5 6.1 December : 7.4 15.3 16.3 7.9 1.0 45.4 48.5 6.1 Weighted average : 6.6 14.2 14.7 7.6 .5 44.9 51.7 3.4

1974:

January 7.4 15.3 16.4 7.9 1.1 45.1 48.2 6. 7 February IMarch

7.5 9.6

16.9 23.8

17.4 20.4

9.4 14.2

.5 -3.4

43.1 47.1

54.0 69.6

2.9 -16.7

April 11.5 22.3 22.8 10.8 .5 50.4 47.4 2.2 May 12.1 26.4 26.2 14.3 -.2 46.2 54.6 - .8 June 14.9 29.3 29.5 14.4 .2 50.5 48.8 .7 July : 17.2 31.2 32.0 14.0 .8 53.7 43.8 2.5 August : 17.1 32.7 33.1 15.6 ,4 51.7 47.1 1.2 September : 18.8 36.1 35.1 17.3 -1.0 53.5 49.3 -2.8 October 20.0 36.1 37.5 16.1 1,4 53.3 42.9 3.8 November : 23.1 45.9 45.8 22.8 -.1 50.4 49.8 -.2 December : Weighted :

30.4 61.7 53.4 31.3 -8,3 56.9 58.6 -15.5

average ; 15.6 30.6 30.5 15.0 -.1 51.1 49.2 -.3

1975: ! January : 31.4 52.4 52.6 21.0 .2 59.7 39.9 .4 February : 27.6 50.4 51.8 22.8 1.4 53.3 44.0 2.7 March 24.8 50.4 50.6 25.6 .2 49.0 50.6 .4 April : 21.4 34.5 38.9 13.1 4.4 55.0 33.7 11.3 May : 18.0 34.5 34.2 16.5 -.3 52.6 48.2 -.9 June : 14.1 28.5 30.6 14.4 2.1 46.1 47.1 6,9 July 12.2 22.0 25.3 9.8 3.3 48.2 38.7 13.0 August : 12.8 26.5 28.4 13.7 1.9 45.1 48.2 6.7 September : 15.5 29.4 29.8 13.9 .4 52.0 46,6 1.3 October : 13.8 27.4 28.5 13.6 1.1 48.4 47.7 3.9 November : 11.7 23.8 26.5 12.1 2.7 44.2 45.7 10.2 December : 10.4 22.2 25.5 11.8 3.3 40.8 46.3 12.9 Weighted :

average' 16.3 30.1 32.8 14.7 1.8 49.0 45.0 6.0

1/ Farm value for the middle of the previous month.

2/ Wholesale price for the Friday nearest the 23rd of the previous month.

^/ Retail price for the first consecutive Tuesday, Wednesday, and Thursday of each month.

109

Appendix table 25—Costs of sugar beet production and processing 1/

Crop Year

Cost items \ 1973 \ 1974 : 1975 2/

Cents per pound, refined basis 3/

Production: : Labor 1.534 1.710 1.695 Custom work ; .623 .865 .944 Supplies ; 1.304 1.851 2.195 Field power and equipment : .976 1.103 1.187

Total direct costs 4.437 5.529 6.021 Indirect costs : 1.147 1.401 1.347 Administration .270 .260 .214 Interest paid .325 .460 .508 Total costs before land rent 6.179 7.650 8.090

Land rent 4/ : .754 1.600 .950 Total production costs : 6.933 9.250 9.040

Processing: Beet acquisition : .981 1.099 1.205 Factory operation : 3.097 3.787 3.738 Mixed charges : .447 .485 .386 Marketing : 2.519 2.880 2.567 Administration : .272 .327 .266 Interest paid : .162 .242 .212 Total processing costs : 7.478 8.820 8.374 Total production and processing costs : 14.411 18.070 5/17.414

1/ See table 37 for costs on a raw value basis. 2/ Preliminary data. 3/ The method used in estimating these crop costs is an update that follows

procedures used by ASCS for prior years. 4/ Reflects extensive share renting that is based on producer returns. 5/ The decrease between 1974 and 1975 is primarily the result of adjustments

that resulted from an increase in yield per acre, an increase in total sugar production and a slight increase in recovery of sugar.

110

Appendix table 26—Costs of sugarcane production and raw sugar processing and refining for Louisiana, Florida, and Mainland cane areas

1973 crop year

Cost items Louisiana Florida, Mainland

i/

1974 crop year

Louisiana Florida Mainland 1/

1975 crop year

Louisiana Florida Mainland 1/

' Cents per pound, refined basis

Production: : Cultivation : 2.710 1.533 2.007 2.883 1.891 2.315 3.274 1.966 2.460 Harvesting : 1.427 1.450 1.440 1.615 1.609 1.611 1.642 1.799 1.740 Field services : 1.593 .820 1.132 1.959 1.057 1.443 2.031 1.164 1.492 Fixed charges : .878 .538 .675 .866 ,598 .713 .853 .637 .719 Services to personnel : .293 .394 .352 .308 .543 .443 .312 .573 .474 Administration : .461 .373 .409 .519 .498 .507 .542 .529 .533 Interest paid : vl82 .389 .307 .226 .525 .397 .246 .622

7.290 .480

Total cost before land rent .- 7.544 5.497 6.322 8.376 6.721 7.429 8.900 7,898 Land rent T 1.010 .401 .647 4.079 .656 2.122 1.229 .599 .837 Total production costs : 8.554 5.898 6.969 12.455 7.377 9.551 10.129 7.889 8.735

Processing: : Cane transportation : .976 .671 .794 1.063 .674 .840 1,114 .766 ,898 Mill costs : 2.679 1.519 1.987 3.050 1.824 2.350 3.131 2.080 2.478 Fixed charges : 4530 .499 .510 .594 .567 .579 .520 .611 .577 Marketing : .105 .373 .265 .117 .431 .296 .128 .477 .346 Administration : .290 .195 .233 .298 .263 .278 .304 .286 .292 Rent ; .081 _,.^ .033 .100 .043 .103 .039 Interest paid : .075 .271 .193 .087 .366 .246 .105 .432 .307 Total processing costs : 4.736 3.528 4.015 5.309 4.125 4.632 5.405 4.652 4.937

Refining: : ; Labor and fringe benefits : 1.269 1.269 1.269 1.524 1.524 1.524 1,653 1.653 1.653 Excise tax : .530 .530 .530 .530 .530 .530 ... -^> ...— Transportation expenses : .609 .609 .609 .725 .725 .725 .788 .788 .788 State and local : .089 .089 ] .089 .098 .098 .098 .106 .106 .106 Other 2/ : IrQOl 1.001 1.001 1.324 1.324 1.324 1.437 1.437 1.437 Total refining costs =3.498 3.498 3.498 4.201 4.201 4.201 3.984 3.984 3.984

Total cosJ:s of production, processing, and refining :16.788 12.924 14.482 21.965 15,703 18.384 19.518 16.525 14.656

1/ Weighted average of Louisiana and Florida, 2J Includes brokerage fees, utilities, packages, depreciation, sales discounts,and other operating charges.

Source: Derived from tablç 36.

AEPENBIX B

PRICING 197A SUGARCANE AND SlJGÄit BEET CmÇS

The Sugar Act of 1948, whiGh was last amended in October 1971, expired on December 31, 1974. It contained a provision that^n order to cjualify for payments under the Act, producers who were also processors of sugarcane and sugar beets, among other things, were required to pay fair and reasonable prices, as determined by the Secretary of VÁgrlculture, for sugarcane or sugar beets purchased from other producers. The intent was to require processors and manufacturers of sugar to share with j)rpducera the revenue they obtained from its sale. The producer 's share of the total revenue, i«hich Included the Sugar Act or conditional payment, was to be in direct relationship to the producer's part of the total cost of production and processing. This share consistently averaged between 60 and 65 percent; the rest accrued to the b^enefit of the processor.

In view of this, the Secretary, by authority, of the Act, was responsible for evaluating the economic positions of producers and processors and setting fair and reasonable prices for sugarcane and sugar beets. This was accompTished through the Department's annual "fair i>rice determination.^'

Sugarcane

Florida

Since Florida sugarcane was generally purchased f.o.b. at the farm, the processor was required to bear the entire cost of transporting the cane from the farm to the mill, subject to a limitation on distance. Sugarcane was converted from net tons to standard tons by applying a standard sugarcane quality factor which was based on the average percentage of sucrose in the fiorraal;^u±ce of the producer's cane. The 1974-crop "fair price determination" stated that the basic price for standard sugarcane would not be less than $lvl5 per ton for each 1 cent per pound of the "season's average price of raw Sugar." The"seasOn's average price of raw sugar" was determined by weighing the quantity of raw sugar delivered to the purchaser each month by the simple averag^e of the daily spot quotation of raw sugar of the New York Coffee aiid Sugar Exchange No. 12 domestic contract. In addition, the processor was required to share with the producer the revenue obtained from the sale of molasses, as specified in the determination.

Louisiana

Louisiana sugarcane was purchased f .o.b^ at the delivery point. Net tons of sugarcane were converted to standard tons by applying factors related to the ^ereentaiges of sucrose and purity in normal juice of the cane. The processor had the dption of settling with jtíie producer ba^ "weekly average price" j "season's average price", or the"delivered average prrce^' of 96-^degree raw sugar as quoted by the Louisiana Sugar Exchange, Inc. The

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Department's 1974-crop determination stated that the basic price for standard sugarcane would not be less than $1.06 per ton for each 1 cent per pound of raw sugar. The determination also made provision for an adjustment in the price of raw sugar relative to the three distinct freight areas. Louisiana processors also shared with producers the revenue they received from the sale of molasses, as specified in the determination.

Hawaii

The delivery point for sugarcane purchased in Hawaii was at the mill or for cane loaded in trucks. The 1974-crop "fair price determination'V stated that the rate for processing sugarcane, which was delivered by a producer under a toll agreement, would not be more than 34 percent of gross proceeds for mill delivery nor more than 49 percent for cane loaded in trucks. The applicable rate was applied to the gross proceeds the processor received from the California and Hawaiian Sugar Company in accordance with the sugar and molasses marketing contract.

Puerto Rico

The 1974-crop "fair price determination" stated that the payment for net sugarcane would be made either by the actual delivery to the producer of his share of raw sugar or by paying the producer for his share of raw sugar. The percentage of payment to the producer, whether in cash or kind, was based on the yield of raw sugar, which was expressed in pounds of raw sugar per 100 pounds of sugarcane. Payment in cash was determined by deducting from the "price of raw sugar" the admissible selling and delivery expenses. "Price of raw sugar" was the simple average of the daily spot price quotations of the New York Coffee and Sugar Exchange No. 12 domestic contract from January 1 through December 31. In addition, the processor was required to either deliver ^o or pay the producer 66 percent of the average production of blackstrap molasses per ton of net sugarcane.

Sugar beets

The 1974 crop "fair price determination" stated that the price for all sugar beets delivered by a producer and processed by a processor would be no less than the amount to be paid according to the purchase contract between the processor and producer. The "participating" contract and the "50-50" contract, which was used only in the Michigan-Ohio area, were the two types of payments used in ''974. Under the "participating contract," payments to growers were bas -d on the sugar content of the beets and the average "net return" the processor received for each 100 pounds of sugar. Even though under the participating arrangement, growers did not share in processor returns from molasses and pulp; their share of the "net return" from sugar averaged between 60 to 65 percent. The average "net return" was computed by deducting all charges and expenses principally related to the marketing of the sugar from the average gross selling price received by a processor during the marketing period specified in the contract. Some contracts contained another provision. When the average "net return" was lower than a slightly adjusted

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"average New York price," producer payments would be based on the adjusted "average New York price." The "50-50" contract permitted an equal division between producer and processor of returns from sugar, molasses, and pulp.

In addition to the payment received from processors, producers received a Sugar Act or conditional pa3mient. To qualify for this payment, producers were required to comply with production restrictions, not employ child labor, and, if they were also processors, pay fair prices for sugarcane or sugar beets. The basic rate of this payment was 0.8 cent for each pound of sugar, raw value, on the first 350 short tons of commercially recoverable sugar contained in the beets or cane produced on a farm. This rate was progressively reduced to a minimum of 0.3 cent a pound on all sugar produced on a farm in excess of 30,000 short tons. The Act also provided limited benefits for producers in the form of special conditional pa3mients for crop deficiency or abandonment caused by droughts, flooding, storms, freezes, diseases, or insects. These payments were commonly known as deficiency payments. Payments to producers were financed by appropriations from general funds of the U.S. Treasury. However, a sugar tax of a half cent per pound, raw value, on all sugar marketed within the quota system provided funds for the Treasury. During the duration of the Act, this tax exceeded the combined total of all payments to domestic producers and the cost of program administration by more than $700 million, but it added to consumers costs through increased prices.

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*U.S. GOVERNMENT PRINTINS OFFICE : ifSO 0-310-9if5/ESCS-96