(Bloomberg) -- After paying record prices for sugar last year, American candymakers can now breathe a sigh of relief: Costs are easing as domestic production is set to climb to an all-time high.
The first beets being harvested in the western part of the country and the Midwest point to higher sugar content. Beets, which account for more than half of the sugar produced in the US, will be the key driver of record output in the year that starts in October, according to the latest estimates from the US Department of Agriculture.
The rise in domestic production is good news for the $49 billion US confectionery industry, which was forced to buy sugar overseas and pay high import tariffs to make up for a shortfall in traditional suppliers like Mexico. US sugar futures traded in New York surged to a peak of 45.75 cents a pound in November before falling about 20% since then.
“Mother Nature has chosen to just cooperate well during the growing season,” said Rebecca Larson, lead research agronomist at the Western Sugar Cooperative, which represents growers in Colorado, Nebraska, Wyoming and Montana. Warmer weather and fewer hailstorms helped beets grow this season, she added.
Farmers are currently pulling the first beets of the season to get processing factories up and running. The sugar content in beets from the so-called pre-pile harvest is currently at 16%, about two percentage points above the typical range, according to Larson.
New plant varieties and herbicides have also helped to mitigate disease, she said.
The US will produce a record 9.5 million short tons of sugar in the 2024-25 fiscal year, according to the USDA. Output from beets is expected to increase by 2.9%, while production from cane will expand 1.4%.
The bumper crop will help support a domestic market that has had to rely on a record amount of higher-taxed imports to compensate for fewer supplies from drought-stricken Mexico.
That “will allow more stability” for candy and food manufacturers “to know that they’re going to be able to get the sugar in the specification that they want when they need it, versus having to wait for sugar to leave India or Brazil or Mexico to get here,” said Rob Johansson, the director of economics and policy analysis at American Sugar Alliance.
The bumper crop is already being reflected in the market. US sugar futures slumped to the lowest in nearly two years in late August. Prices, which are currently around 36 cents a pound, could still decline by another 10%, said Owen Wagner, a senior analyst at Rabobank.
To be sure, domestic production will be enough to meet just over three-quarters of projected US demand in the 2024-25 year, according to the USDA. And the agency on Thursday reduced last month’s projection for total sugar production due to smaller-than-expected beet plantings.
The weather could also impact crops. Beets need dry conditions to allow sugar to concentrate inside the plant and to facilitate harvesting. Later in the season, cold temperatures are crucial to ensure that beets stored outdoors don’t spoil.
“It only takes an inch of rain to make it kind of miserable,” said Neil Rockstad, a fourth-generation farmer in Minnesota, who is about to collect his second pre-pile harvest. “But I’m optimistic that the weather is going to continue to be nice.”
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