By Chris Prentice
NEW YORK, Oct 31 (Reuters) - At least three U.S. sugar refiners, including household names Domino Sugar and Imperial Sugar, are trying to raise this season's prices by as much as a third in a bid to capture a sudden recovery in global prices from three-year lows as supplies dwindle.
American Sugar Refining Group's Domino Foods Inc, Louis Dreyfus Commodities' U.S. sugar unit Imperial Sugar Co and United Sugars Corp notified their customers of new prices lists 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 for ongoing negotiations between sugar companies and their customers, traders said.
If successful, the move could mark an inflection point for the depressed U.S. market, the strongest sign yet that the U.S. government's historic efforts to boost domestic prices by removing excess inventories have worked.
In a letter dated Oct. 2, Domino listed a price of $33 a hundredweight, or 33 cents a lb, freight-on-board at their refineries with immediate effect. Imperial followed with similar terms on Oct. 9.
That is up to a quarter less than October last year when the firms 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's spot prices of $25-$27 for refined beet and cane sugar, industry sources said. Trading above 21 cents, spot U.S. domestic futures on ICE Futures U.S. have recovered 17 percent from July's multi-year lows.
For many major consumers that buy sugar on long-term contracts, the bulk of this season's needs are already booked.
But the letters mark an effort by U.S. refiners to establish a floor under prices, potentially ending a years-long bear market even as the global market remains awash with excess supplies from Brazil, Thailand and Mexico, traders said.
Renewed optimism in the global market has waned over the past two weeks, as ICE raw sugar prices have plunged over 9 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 chief executive officer of Domino Foods Inc, which owns Domino Sugar, told Reuters.
Weak prices had already triggered contract defaults that roiled refiners, including Imperial Sugar.
"We're not raising the price to a level that's not warranted from an economic standpoint," O'Malley said. "Prices are going up because the supply of sugar is being reduced."
An executive for United Sugars did not respond to calls for comment, and a Louis Dreyfus spokeswoman declined to comment.
Domino, the first of the three to issue its price list for brands 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, but everyone feels the direction is certainly to a higher number," said one U.S. distributor.
Refiners revise their price lists as and when the market makes a big move, but they were notably quiet as the domestic market slumped to historic lows this summer, traders said.
United Sugars listed prices for refined beet and cane sugar at $28 per cwt on a bulk basis, or about 28 cents a lb, in an Oct. 7 letter to customers.
Traders say that is down significantly from last year's prices. It is not clear why United Sugars did not fall in line with its two rivals.
Domino and United Sugars' price lists are for the season to end-September 2014, while Imperial Sugar did not specify dates.
The price hikes come after a sudden about-turn of the U.S. market's fortunes and may stir criticism of the U.S. Agriculture Department's costly moves this summer to whittle down excess supplies and bolster domestic sugar prices.
"It's clear the combination of actions by USDA, the forfeitures, and the Mexican decision to export sugar to the world market have tightened the outlook considerably," said Tom Earley, a food policy consultant with Agralytica in Virginia.
He consults for the Sweetener Users Association, which has opposed the government's intervention this summer.
Numerous government efforts and two waves of forfeitures of sugar 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 days after American Crystal Sugar Co, one of the cooperatives it markets for, defaulted on about half of its loans and offloaded $46.6 million worth of sugar.
Further, the three firms together bought at favorable terms two-thirds of the 184,000 tonnes of material that the U.S. government auctioned off at an $85-million loss, though the program was less costly than the U.S. government's fledgling "sugar-for-ethanol" program.
Altogether, the brightening outlook remains tenuous. A global price recovery is stalling, and imports from Mexico loom without barrier to the otherwise protected U.S. market.
"Even though they have these price lists, there's some resistance from the customers because there's still a lot of sugar out there," said a U.S. broker.