Sweeteners industry facing many challenges in 2017

by Ron Sterk
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Ron Sterk

The headwinds have been building, but after the Nov. 8 elections it appears 2017 may be a critical year for the sweetener industry, with both positives and negatives on the prospective agenda producers and users.

The list of critical regulatory, tax and trade items on the sweetener industry’s agenda is long: G.M.O. labeling, added sugars on the Nutrition Facts Panel, beverage taxes, trade agreements, new farm bill negotiations, sugar program reform, global pressure to reduce caloric sweetener intake and more. While some of the issues may become clearer soon after President-elect Donald J. Trump takes office, most will progress through the year and some well beyond.

Sweeteners in soda
Legislative, regulatory and trade issues will affect the sweeteners market in the coming year.

The fall elections brought more clarity to the apparent building momentum of beverage taxes, which came on the heels of a recent World Health Organization recommendation to tax beverages sufficiently to boost prices by 20%, which it claims will reduce soda consumption and aid in its earlier recommendation that  non-nutritive calories should constitute no more than 5% of total daily caloric intake (most agree 10% is more realistic). The residents of four cities, Albany, Oakland and San Francisco, Calif., and Boulder, Colo., passed taxes that will go into effect in 2017. They join Berkeley, Calif., which passed a soda tax in 2014, and Philadelphia, where the City Council passed a tax on both sweetened and diet beverages earlier this year (that tax is being challenged in court). A few days after the election, the Cook County, Ill., (Chicago) Board also approved a beverage tax to begin in 2017. It should be noted that beverage taxes, if they have any impact at all, may affect high-fructose corn syrup more than sugar.

The election also appears to have dealt a death blow to the Trans-Pacific Partnership (T.P.P.), which had language to increase sugar imports from Australia. Mr. Trump also has expressed his distaste for the North American Free Trade Agreement, although it appears that NAFTA may be renegotiated rather than dumped like the T.P.P. Again, the impact on sugar may be limited since a 2014 agreement that suspended countervailing duties on sugar imports from Mexico in effect negated the free flow of sugar from south of the border.

The G.M.O. and Nutrition Facts Panel labeling issues are much broader than sugar, although the Nutrition Facts Panel does have a focus on added sugars. There was industry movement last week seeking a delay in the Nutrition Facts Panel changes, in part to align timing so food manufacturers don’t have to go through multiple label changes for G.M.O.s and the Nutrition Facts Panel.

Added sugars label on Nutrition Facts panel
The new Nutrition Facts Panel has a focus on added sugars.

Every time the five-year farm bill, which contains the provisions for the U.S. sugar program, comes up for renewal, there is a fight between sugar producers, who strongly prefer the sugar program’s import limits to protect the domestic industry, and sugar users, who want greater access to world sugar supplies. Anti-sugar program efforts have been building, and it will be interesting to see how they fare this time around. But never count out the political clout of the sugar producers.

So the question is what, if any, impact will all of the regulatory, political and trade jousting have on sweetener producers, food manufacturers (users) and the consuming public? The costs of label changes, lobbying and anti-soda tax efforts will be monumental. But the final impact on the sugar market may well be minimal based on past experience, and on pricing, which is steady with nearby values through 2017 and 1c to 2c a lb higher for 2018.

So far, indications of reduced demand for bioengineered beet sugar in the first half of 2016 in favor of increased demand for non-G.M.O. cane sugar have slowed, and the beet industry is on schedule to produce a record supply. The broad and growing attempts to reduce sugar and soda consumption have been met with record high total domestic sugar supplies.

Beet sugar
Indications of reduced demand for bioengineered beet sugar in the first half of 2016 in favor of increased demand for non-G.M.O. cane sugar have slowed.

Although down from its 1999 peak, total caloric sweetener deliveries for food and bev-erage use have increased since a two-decade low in 2009, according to U.S. Department of Agriculture data. Per capita deliveries, which also peaked in 1999, have held steady for the past five years.

The U.S.D.A. forecast 2016-17 (October-September) total U.S. sugar production at a record 9,331,000 short tons, raw value, as the result of a 2% increase in cane sugar outturn from 2015-16 at 3,960,000 tons and an expected 5% increase in beet sugar outturn at a record 5,371,000 tons.

At some point the growing opposition to caloric sweeteners may begin to turn the tide, but at least for now, it would appear the consumers’ sweet tooth remains strong and the industry — both sweetener producers and food manufacturers — will respond to that demand amid a storm of challenges.

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