Bad harvests make for boon, burden for U.S. sugar trade
BALTIMORE — In Baltimore’s Inner Harbor, the century-old Domino Sugar refinery steadily produces the crucial ingredient in American candy, soda and other foods.
The already busy plant soon will need to burn even more calories.
Unusually bad weather around the country ruined U.S. sugar beet and sugar cane crops last year, leading government officials to seek an 80% increase in raw sugar imports from Mexico. Extra cargo already has begun arriving by ship to the piers of a small number of processing plants, including Baltimore’s Domino Sugar refinery.
The increase could push plants that normally run close to capacity to full capacity for an extended period this year, a churn that would be “historically unprecedented,” according to economists at the U.S. Department of Agriculture.
At Domino that means workers will skip every other weekend off, working 12 days in a row. That’s a strain, officials said, but for now at least it’s welcomed overtime at the Locust Point plant, one of the last major industrial operations on the largely gentrified part of the harbor.
“We’re up to the challenge,” said Tim Noud, the refinery manager. “Going to the 12-and2 schedule will help us meet our production goals.”
Noud said the normal workday isn’t expected to change, with three shifts of workers on the clock day and night, processing about 6.5 million pounds of raw cane sugar a day. But the extra workdays every other weekend will add substantially to production this year.
For now, managers are relying on volunteers who want to supplement their pay, which is a minimum of $24 an hour before overtime. The 12-and-2 schedule is typical only during “baking season” from September to December. This time, Domino might be extending the workweek for more than nine months.
The USDA economists noted that a terrible situation for farmers will be a boon and burden for the refineries.
“It’s unusual to see refineries at 100% for a long period of time without problems or equipment breakdowns,” said Steve Haley, a sugar economist for a USDA board that analyzes supply and demand. “One could argue it’s unreasonable and there are going to be some significant problems.”
While harsh weather and bad harvests are not new, the level of devastation last year was far more widespread than usual, and some economists say it’s a possible harbinger of what’s to come as a result of climate change. The unprecedented situation has government and industry officials working without a recipe.
Wet and cold weather had the mostly unheard of effect of harming sugar beet crops in Northern states and sugar cane crops in Southern states. In Minnesota, for example, a wet October followed by a hard freeze in early November meant sugar beet fields were too wet to harvest before the beets became frozen in the ground, according to a Minnesota Public Radio report.
Sugar beets, grown across a broad part of the upper United States, from Michigan to Washington state, account for more than half of U.S. refined sugar. Sugar cane grows in Florida, Louisiana and Texas.
The result of the bad weather was a 10-year low in production, said Robert Johansson, the USDA’s chief economist, coming at a time when the nation’s sweet tooth has pushed demand far higher than a decade ago.
The sugar trade is governed under a long-standing USDA program aimed at protecting U.S. sugar farmers. Under a separate agreement signed in 2014, Mexico was given the first chance to fill shortages in the U.S. sugar supply.
It’s not yet known whether Mexico can spare enough to completely fill the gap, the USDA economists said. If not, supply could come from Brazil and other countries.
The USDA asked the Commerce Department to allow the extra sugar imports last fall — some raw sugar and some already refined into the granular product familiar to consumers. There will be far more raw sugar among the extra imports, which would be minimally processed in Mexico before being finished at U.S. refineries.
With the increase, an estimated 1.8 million tons will arrive at U.S. ports this year from Mexico, up from about 1 million tons. Imports from all sugar-producing countries usually total 3 million to 4 million tons a year to supplement about 9 million tons produced domestically.
If demand continues to exceed supply on store shelves and in food manufacturing plants, more sugar imports could be allowed, but they could carry higher tariffs, potentially pushing up consumer prices, the agriculture officials said.
“We’ll be keeping an eye on things,” Johansson said.
Domino already is the nation’s largest marketer of refined sugar. Domino Food Inc. is owned by Florida-based ASR Group and produces those bright yellow packages of sugar sold at the grocery store. It also supplies sugar to food makers.
Domino operates two sugar cane refineries in addition to the one in Locust Point in Baltimore, including in Yonkers, N.Y., and Chalmette, La. Extra sugar shipments are expected at each plant.
If the added imports successfully substitute for the missing domestic supply, food makers will go about producing not only sweets, but also bread, pasta and many other products that contain sugar, said Rick Pasco, president of the Sweetener Users Association, a Washington-based trade group whose members include food and beverage companies that use sugar.
“We’re hoping the refineries like Domino can crank out as much sugar as they can,” Pasco said. “Capacity is a real problem. Can they deliver? There was drought in Mexico. Can they supply enough? There are a lot of moving parts, and overall it’s not a great situation.”
The increase could push plants that normally run close to capacity to full capacity for an extended period this year, a churn that would be “historically unprecedented,” according to economists at the U.S. Department of Agriculture.