Sugar production: merits of vertical integration
International Sweetener Symposium have touted the advantages for
farmers and consumers of vertical integration in the American
sugar-producing industry.
Sugar industry experts meeting this week at the annual International Sweetener Symposium have touted the advantages for farmers and consumers of vertical integration in the American sugar-producing industry.
Two sugar company directors, a food manufacturing executive and an industry analyst provided their views on the rapidly changing nature of US sugar production during a panel discussion at the Symposium.
According to analyst Craig Ruffolo from McKeany-Flavell, the number of refined beet and cane sugar selling companies has shrunk from 33 three decades ago to only seven today, and that five of these seven are owned by sugarbeet and sugarcane farmers. Ruffolo said grower ownership of sugar processing facilities provides "excellent opportunity to increase efficiency and become low-cost producers."
This will be good news for the consortium of French and Italian sugar beet growers currently in negotiations to buy French sugar group Beghin-Say.
Ruffolo added that consumers benefit from their ability to "buy from low-cost producers who provide 'just-in-time' delivery, quality control through the entire process, extended distribution systems, and 'specialty' sugars that suit each customer's needs."
Don Carson of Domino Sugar said that because of declining producer prices, 18 beet and cane mills had closed since 1996 and the percentage of US refined sugar produced by grower or co-operatively owned companies had shot up to about 70 per cent. Carson noted:"The upheaval we have been through has made us one of the most cost-efficient industries in the world."
Rick Dorn, a sugarbeet farmer and director of the Western Sugar Co-operative, said that 85 per cent of this year's US sugarbeet crop would be processed by grower-owned mills.
Scott Wulff, who purchases sugar for food manufacturer General Mills, noted that vertical integration should help sugar producers "cope with the challenge of increasing efficiency while volumes are down" because of the recent decline in sugar demand. Wulff noted that US sugar consumption has been flat for three years.
The American Sugar Alliance, which sponsors the annual International Sweetener Symposium, is a national coalition of growers, processors and refiners of sugarbeets, sugarcane and corn for sweeteners.
