Cane Sugar, Except Refining

SIC 2061

Companies in this industry

Industry report:

This classification includes establishments primarily engaged in manufacturing raw sugar, syrup, or finished (granulated or clarified) sugar from sugar cane. Establishments primarily engaged in refining sugar from purchased raw sugar or sugar syrup are classified in SIC 2062: Cane Sugar Refining. Plantations primarily involved in production of sugar cane and sugar beets are classified in SIC 0133: Sugar Cane and Sugar Beets

Industry Snapshot

A tropical grass that reaches a maximum height of 10 to 20 feet, sugar cane contains a relatively high level of sucrose. Sugar mills begin the process of extracting sucrose from the sugar cane by washing the stalks of cane and cutting them into shreds with rotating knives. The shredded cane is then run between giant rollers to extract the sugary juice. This juice is then clarified and crystallized into golden raw sugar. The raw sugar that emerges from the sugar mills is more than 95 percent sucrose.

Beginning in the late 1700s, producing raw sugar was a lucrative business for growers and millers. Domestic sugar prices were government controlled, and foreign imports were strictly limited. With the 1981 Agricultural and Food Act (Farm Act), programs were implemented that supported U.S. sugar prices above comparable levels in the world market. The program was reauthorized with some modifications in succeeding Farm Acts, including that passed in 2008. However, the U.S. adoption of the United States-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) in 2005, as well as the North American Free Trade Agreement (NAFTA), greatly affected the industry. For example, in 2008, Mexico was granted free access to the U.S. market, a move that could, according to the American Sugar Alliance, cause as much as 1 million tons of subsidized Mexican sugar to flood the United States. The 2008 Farm Bill provided some hope to sugar producers, as it included some provisions to help U.S. sugar producers deal with increasing production costs and subsidized imports from Mexico. The Farm Bill also continued the policy of not granting subsidies to U.S. sugar farmers while maintaining market balance to sustain stable prices.

Organization and Structure

The sugar cane industry is confined by the crop's growing conditions and the logistics of transporting sugar cane. Mills that process sugar cane into raw sugar must be located near cane plantations because cut sugar cane is too bulky and heavy to ship. Sugar cane mills process cane into crystals of raw sugar that can be transported in bulk, like grain, aboard ships or by land. Therefore, production in the United States is limited to Florida, Hawaii, Louisiana, and Texas. Florida alone accounted for more than 50 percent of total U.S. cane sugar production throughout the first decade of the 2000s.

Sugar mills are located near the plantations on which sugar cane is grown and harvested. In many cases, these are operated by the plantations or as cooperatives by the owners of several sugar cane plantations. The United States Sugar Corporation in Clewiston, Florida, for example, is both a grower and manufacturer of raw cane sugar.

Mills run continuously, day and night, from fall until spring, when the last cane is harvested. To facilitate the constant milling, growers cultivate a variety of sugar cane that they can harvest throughout the season. The variety of cane available, however, depends on the soil and climate on a particular plantation.

Government Supports
The U.S. government has supported sugar prices for more than 200 years. In 1789, the federal government imposed an import tariff to raise revenue, and for the next 100 years, this tariff yielded almost 20 percent of all import duties, the main source of government money before the Civil War. The Sugar Act of 1934 regulated domestic sugar production, imports, and prices. Import quotas were assigned to foreign sugar-growing countries.

Price supports were applied sporadically during the 1970s, depending on the price of sugar on the world market. Temporary suspensions of price controls in 1974 and 1980 resulted in increased sugar prices. Shortages soon followed and sugar prices plummeted.

As a result, in the Agriculture and Food Act of 1981, the government agreed to purchase raw cane sugar and refined beet sugar for a specific price per pound if commercial prices were not high enough. In order to avoid payments, the government imposed tariffs to discourage imports, limit the supply of sugar, and keep sugar price levels at or above the government's minimum price. Farmers claimed that they received no benefit from the subsidies and that U.S. consumers paid 28 percent less for sugar than consumers anywhere else worldwide. However, the U.S. price for sugar in 1995 was more than double the world's price. Subsequent agricultural acts continued to provide price supports for sugar, keeping quotas low and prices high in the domestic market.

The United States imposed strict quotas on the import of foreign sugar, cutting imports 80 percent between1975 and 2000. The tariff on sugar imports in excess of the quota was also high enough to discourage imports. This quota created great controversy regarding U.S. trade with developing nations. More than 110 countries grow sugar cane or sugar beets, and many of the developing nations had become dependent on sugar as a source of employment and income. In the early 1990s, the United States imported less than 1.5 million tons of sugar to make up the difference between the sugar cane produced domestically and the approximately 9 million tons used. Even though the 2002 Farm Bill limited sugar imports to 1.53 million tons, the Bush administration held it at about 1.23 million tons for fiscal year 2005.

Some critics of the U.S. foreign trade policy blamed the federal sugar support program for the rise in cocaine traffic into the United States. These critics claimed that not only did the sugar program hurt other countries financially, but the loss of sugar trade with the United States contributed to increased coca (from which cocaine is derived) production in Bolivia and Peru. U.S. sugar producers disputed this claim, maintaining a primary factor in the decline was nationalization of Peru's sugar industry rather than cuts in U.S. sugar imports.

In the 2000s, price supports for sugar in the United States were provided in the form of nonrecourse loans so sugar growers could borrow money with the crop as collateral. The government set the value of the crop collateral at a minimum price per pound, guaranteeing that the sugar producer would receive at least that price, even if the commodity price dropped. Loans were made to the processor because the raw sugar cane must be milled before being sold or stored. When the raw sugar was sold, the growers reportedly received payment as well. In many cases, the processor and the grower were the same concern.

Processing
The harvesting of sugar cane poses many challenges to producers. Harvesting is done by hand cutting or machine cutting. Harvesting by machine costs half as much as harvesting by hand, but mills complain that machine-harvested sugar includes too much debris, such as roots, dirt, leaves, and dead animals. Mill owners estimate that machine-harvested sugar cane includes 7 to 10 percent trash, while hand-cut cane includes only about 2 percent. Mill owners complain that trash costs them money because it clogs the machines and absorbs juice during milling, and they also claim machines leave too much cane in the field because machines cannot cut as close to the ground as the hand cutters. Owners claim that every acre left with half-inch cane stubble would have made another half ton of cane to be milled.

Sugar cane stalks are transported to nearby mills in trucks or railroad cars to be washed and shredded before being placed in crushing machines or vats of hot water to dissolve the sugar. Crushing machines break open the cane and squeeze out the sugary juice. Water dissolves more of the sugar in the stalk, creating a sugary mixture called cane juice. The cane juice is heated, and lime is added to settle impurities. Next, carbon dioxide is used to remove the lime. The clear juice moves on to giant evaporator tanks. After removing most of the water, the thickened mixture is transferred to a vacuum pan where the mixture is heated to remove still more water. When crystals form in the syrup, the mixture is transferred to a centrifuge. The mixture is spun at high speeds to separate large sugar crystals from the thick syrup. The crystals, which are 97 to 99 percent sucrose, are called raw sugar. Producers may package the raw sugar, as turbinado, for consumer use or sell it to cane sugar refiners for the manufacture of granulated or powdered sugar. Any foreign sugar shipped to the United States is also transported in raw form.

In the late 1990s, there was a sharp decline in U.S. sugar prices, which the cane sugar producers blamed on increased sugar imports from Mexico under the North American Free Trade Agreement (NAFTA). As sugar cane harvesting for the 1999-2000 crop year got under way in October 1999, U.S. sugar price fell below 19 cents a pound, its lowest level in decades. In June 2000, the U.S. Department of Agriculture spent $54 million to buy 132,000 tons of refined sugar in an effort to keep sugar prices from dipping any lower.

Sugar and other agricultural supports continued to be criticized by certain members of Congress and other government officials. Sugar producers claimed that the federal sugar program protected U.S. consumers from wild swings in world prices, but critics contended that U.S. consumers faced higher costs than necessary.

The shift to high fructose corn syrup use by the U.S. beverage industry began in the 1980s. Its price in 1985 was approximately 7 cents per pound less than sugar, and the savings to the industry megaliths the previous year had been $90 million. This move by the beverage industry was assisted by the push of corn conglomerates such as Archer-Daniels-Midland Company and Cargill. That same year the U.S. sugar market declined about 8 percent.

U.S. sugar production in fiscal 2000 reached a record 9.035 million short tons, raw value (STRV), up 700,000 STRV from fiscal 1999. The increase was due partly to increased production in Louisiana, where sugar cane output grew 34 percent between 1995 and 2000. In fact, Louisiana's 430,000 acres of sugar cane planted in 2006 exceeded Florida in terms of actual sugar cane acreage. Modest demand was simply unable to support this growth in production, and analysts predicted continued struggles for the U.S. sugar industry throughout the late 2000s.

Pollution in the Everglades
According to environmentalists, agricultural run-off from sugar plantations and milling processes in South Florida were responsible for damage to the Everglades. In 1991, U.S. Sugar was fined $3.75 million for improper disposal of hazardous materials from one of its Clewiston mills in the Everglades. The company pleaded guilty to knowingly allowing hazardous wastes into local landfills during three harvest years. Environmentalists continue to raise concerns about the impact of the sugar industry on the fragile ecosystem of the Everglades. In 2009, Florida received approval to buy 73,000 acres of land owned by United States Sugar Corporation for a large environmental recovery project in the Everglades. This followed an attempt by the state to purchase the company, which was thwarted due to political pressure and a declining economy.

Other Developments
The sugar cane industry was embroiled in a contentious political battle in the mid-2000s, stemming from the inclusion of the industry in the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR). Under the 2002 Farm Bill, overall sugar consumption was designated in advance, with fixed proportions of cane sugar at 54.35 percent and beet sugar at 45.65 percent. The bill allowed sugar processors to borrow from the USDA by pledging their sugar as collateral at the rate of 18 cents per pound for cane sugar and 22.9 cents per pound for beet sugar. The loans had to be repaid within nine months or the sugar was forfeited.

The controversy stemmed from the fact that the loan rates were double the amount of world sugar prices (9 cents per pound). The program indirectly subsidized the market by guaranteeing that the sugar industry would receive a price no lower than the loan values. By propping up U.S. domestic prices, the U.S. government maintained sugar at 20.5 cents per pound. The forfeited sugar was offered back to producers who reduced their production. The $2 billion difference came from the U.S. public, which paid inflated prices for the sugar. Added to this was the removal of tariffs and trade barriers between the United States and Central America by CAFTA-DR, further adding to the stored sugar stocks used as collateral and further depressing production. Sugar policy continued to be an issue in the industry after passage of the 2008 Farm Bill, which left many of the existing provisions in place and increased governmental support levels.

Other major industry shifts occurred in the first decade of the 2000s. For example, cane sugar was the dominant sugar in U.S. markets, but beet sugar took a 55 percent lead in annual production yield in the mid-2000s. Moreover, while both beet and cane sugar acreage was reduced, cane dropped most precipitously. One major reason was that beet sugar thrives in more climates. In 2005, 12 states were growing beet sugar while only four grew cane. While beet sugar production jumped 17.6 percent between 1990 and 2005, the sugar cane industry's production total was only up 6.6 percent during that same time.

Current Conditions

According to the U.S. Department of Agriculture, 854 million acres of sugar cane were harvested in 2009, down from 868 million in 2008. Louisiana was the top state in acres harvested, with 400 million, followed closely by Florida with 393 million. Texas accounted for 39 million acres and Hawaii a mere 22 million. Total number of acres devoted to sugar cane had been steadily declining throughout the decade, with 938.2 million acres harvested in 2004. Value of production, on the other hand, rose from $821 million in 2004 to $887 million in 2007. Of that total, Florida accounted for about $448 million, followed by Louisiana with $355 million, Hawaii with $50 million, and Texas with $32 million.

In the late 2000s, cane sugar amounted to a little less than half the 44 pounds per capita of sugar consumed by Americans. According to the Food and Agricultural Policy Research Institute, 29 million tons of cane sugar were produced in the United States in 2008. The Institute predicted a slow but steady decrease in production over the following ten years. Total value of shipments in 2007 was $1.8 billion, according to the U.S. Census Bureau. Other Census Bureau figures showed there were 21 sugar cane mills employing 3,976 workers in 2007.

Industry Leaders

The undisputed leader in the domestic cane sugar industry in the late 2000s was United States Sugar Corp. of Clewiston, Florida, which produced 700,000 tons of sugar cane annually, representing nearly 10 percent of all U.S. sugar. It was also a major producer of oranges and orange juice. Sales for the company totaled $120.8 million in 2007. Effects of the purchase of 73,000 acres of the company's land by Florida in 2009 were yet to be seen. Other leaders included Imperial Sugar, based in Sugar Land, Texas, which posted sales of more than $592 million in 2008, and American Sugar Refining, maker of Domino sugar and headquartered in Yonkers, New York. American Sugar was jointly owned by the Sugar Cane Growers Cooperative of Florida and the Florida Crystals Corp.

An industry leader that was more diversified was Alexander and Baldwin Inc., based in Honolulu, Hawaii. The company had holdings in transportation and real estate as well as sugar and coffee. Total sales for all divisions of the company in 2008 reached $1.9 billion.

A major player in the Florida cane sugar business was the Fanjul family that, through its network of family-owned sugar plantations, was said to supply the domestic market with more than 15 percent of its cane sugar. Members of the Fanjul family, which immigrated to the United States from Cuba after Fidel Castro took power in 1959, controlled a number of cane sugar companies, including Flo-Sun Sugar in West Palm Beach. According to the company's Web site, Flo-Sun produced 10 million tons of sugar cane on about 400,000 acres (155,000 acres in Florida and the remainder in the Dominican Republic) to earn $2.5 billion in 2006 with 25,000 workers.

Workforce

Employment in the fields and in the mills is seasonal, peaking between fall and spring. Although cutters are employed by the sugar growers, many South Florida plantations are owned by the large sugar mills, which makes them part of the industry in the country's leading sugar-producing state. Sugar harvesters, called cane cutters, face one of the most grueling jobs imaginable. For decades, the Florida sugar cane industry came under fire for the severe, even slave-like, conditions in which the cutters lived and for illegal wage practices. Most Florida cane cutters are seasonal workers migrating from the Caribbean for the harvest.

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