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Surging U.S. sugar price to boost food company costs

NEW YORK -- Food manufacturers such as Mondelez International and J.M. Smucker Co. will face billions of dollars of additional costs this year because of soaring sugar prices, according to estimates from a sugar buyers group.

NEW YORK -- Food manufacturers such as Mondelez International and J.M. Smucker Co. will face billions of dollars of additional costs this year because of soaring sugar prices, according to estimates from a sugar buyers group.

U.S. sugar prices have surged 40 percent since the U.S. sugar industry initiated a trade case with Mexico. That will cost food manufacturers an additional $2.4 billion in the fiscal year that began Oct. 1, according to a from the Sweetener Users Association.

The U.S. Commerce Department in August made a preliminary decision to impose countervailing, or anti-subsidy, duties on sugar from Mexico in response to allegations from the U.S. sugar industry that Mexican mills were dumping cheap, subsidized sugar into the U.S. market.

Domestic prices for refined sugar have jumped about 7.6 cents a pound since the cases were filed, translated to an additional $837 million in sugar costs for food manufacturers, says Tom Earley, a food policy consultant at Agralytica in Virginia and author of the report.

Industry pressure and tensions mounted ahead of the Oct. 24 deadline for the Department's initial determination on potential dumping duties, which would be added to anti-subsidy duties of up to 17.01 percent.

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The costs could grow from there, depending on the size of any the antidumping duties, Earley says on a conference call regarding the report.

"We have the decision coming up on dumping duties. Those would clearly push up prices," he says.

Domestic sugar prices hit multi-year lows last year on surging output in Mexico and the U.S. Mexico's sugar mills have had unfettered access to the U.S. market since the 2008 implementation of NAFTA in the sugar market.

While the Sweetener Users Association does not identify its members, the trade case has meant a jump in prices and supply uncertainty for sugar buyers that include candy makers like Hershey Co. and Mars Inc.

Though data is not yet publicly available, the U.S. Agriculture Department has estimated that Mexican sugar imports plunged to about 28,300 tons in September after the U.S. government began collecting the first round of duties.

That was down by two-thirds from the previous month and by more than 80 percent from September 2013.

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