Sudden sugar rush sparks U.S. price hikes by Domino, Imperial


By Chris Prentice

NEW YORK, Oct 31 (Reuters) - At least three U.S. sugarrefiners, including household names Domino Sugar and ImperialSugar, are trying to raise this season's prices by as much as athird in a bid to capture a sudden recovery in global pricesfrom three-year lows as supplies dwindle.

American Sugar Refining Group's Domino Foods Inc, LouisDreyfus Commodities' U.S. sugar unit Imperial SugarCo and United Sugars Corp notified their customers of new priceslists in letters sent earlier this month and seen by Reuters.

With the companies representing more than half of U.S.refined annual output of about 11 million tonnes - worth about$7 billion last season - the new prices will set the tone forongoing negotiations between sugar companies and theircustomers, traders said.

If successful, the move could mark an inflection point forthe depressed U.S. market, the strongest sign yet that the U.S.government's historic efforts to boost domestic prices byremoving excess inventories have worked.

In a letter dated Oct. 2, Domino listed a price of $33 ahundredweight, or 33 cents a lb, freight-on-board at theirrefineries with immediate effect. Imperial followed with similarterms on Oct. 9.

That is up to a quarter less than October last year when thefirms had prices of $38.50 and $44.50 per hundredweight,reflecting the depressed market conditions.

But they are as much as a third higher than last month'sspot prices of $25-$27 for refined beet and cane sugar, industrysources said. Trading above 21 cents, spot U.S. domestic futureson ICE Futures U.S. have recovered 17 percent fromJuly's multi-year lows.

For many major consumers that buy sugar on long-termcontracts, the bulk of this season's needs are already booked.

But the letters mark an effort by U.S. refiners to establisha floor under prices, potentially ending a years-long bearmarket even as the global market remains awash with excesssupplies from Brazil, Thailand and Mexico, traders said.

Renewed optimism in the global market has waned over thepast two weeks, as ICE raw sugar prices have plunged over9 percent from one-year highs above 20 cents per lb on Oct. 18.

The increases are necessary after margins had eroded to"dangerous" levels, Brian O'Malley, president and chiefexecutive officer of Domino Foods Inc, which owns Domino Sugar,told Reuters.

Weak prices had already triggered contract defaults thatroiled refiners, including Imperial Sugar.

"We're not raising the price to a level that's not warrantedfrom an economic standpoint," O'Malley said. "Prices are goingup because the supply of sugar is being reduced."

An executive for United Sugars did not respond to calls forcomment, and a Louis Dreyfus spokeswoman declined to comment.


Domino, the first of the three to issue its price list forbrands including Domino Sugar, Florida Crystals and C&H Sugar,is likely to set the industry benchmark, traders said.

"Everyone is assessing the market on a daily basis, buteveryone feels the direction is certainly to a higher number,"said one U.S. distributor.

Refiners revise their price lists as and when the marketmakes a big move, but they were notably quiet as the domesticmarket slumped to historic lows this summer, traders said.

United Sugars listed prices for refined beet and cane sugarat $28 per cwt on a bulk basis, or about 28 cents a lb, in anOct. 7 letter to customers.

Traders say that is down significantly from last year'sprices. It is not clear why United Sugars did not fall in linewith its two rivals.

Domino and United Sugars' price lists are for the season toend-September 2014, while Imperial Sugar did not specify dates.


The price hikes come after a sudden about-turn of the's fortunes and may stir criticism of the U.S. AgricultureDepartment's costly moves this summer to whittle down excesssupplies and bolster domestic sugar prices.

"It's clear the combination of actions by USDA, theforfeitures, and the Mexican decision to export sugar to theworld market have tightened the outlook considerably," said TomEarley, a food policy consultant with Agralytica in Virginia.

He consults for the Sweetener Users Association, which hasopposed the government's intervention this summer.

Numerous government efforts and two waves of forfeitures ofsugar used as collateral for government-backed loans by U.S.sugar processors are the major reasons for lower inventories.

Perhaps most notably, United Sugars' letter came just daysafter American Crystal Sugar Co, one of thecooperatives it markets for, defaulted on about half of itsloans and offloaded $46.6 million worth of sugar.

Further, the three firms together bought at favorable termstwo-thirds of the 184,000 tonnes of material that the U.S.government auctioned off at an $85-million loss, though theprogram was less costly than the U.S. government's fledgling"sugar-for-ethanol" program.

Altogether, the brightening outlook remains tenuous. Aglobal price recovery is stalling, and imports from Mexico loomwithout barrier to the otherwise protected U.S. market.

"Even though they have these price lists, there's someresistance from the customers because there's still a lot ofsugar out there," said a U.S. broker.

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