The industry relies on subsidies for steady profit, though revenue fluctuates wildly
Los Angeles, CA (PRWEB) December 02, 2012
The US Sugarcane Harvesting industry has endured drastic spikes and drops in revenue over the five years to 2012. Global weather patterns are largely responsible for fluctuations in price and production, which directly influence revenue. Sugar prices skyrocketed during the 2009 and 2010 growing seasons due to heavy rainfall that harmed crops in Brazil, the world's leading sugarcane producer. According to IBISWorld industry analyst Agiimaa Kruchkin, “consequently, the disruption in the global supply of sugar boosted demand for US downstream sugar products.” As a result of the ensuing 17.0% and 44.3% sugar price hikes in their respective years, as well as production growth, sugarcane harvesting industry revenue shot up 28.4% and 6.7% in 2009 and 2010, respectively. Although the effects wore off in 2011 and revenue is expected to decline 1.7% in 2012, industry revenue has grown at an annualized rate of 4.0% to $1.16 billion during the five years to 2012.
Industry profitability is less volatile than revenue, though is still subject to weather conditions, sugar prices and circumstances in the downstream Sugar Processing industry (IBISWorld report 31131). Downstream sugar processors are protected by government price supports and import quotas, which inflate domestic sugar prices and protect the local industry from cheaper imports. Although sugarcane farmers do not directly reap benefits from these programs, they receive payments from processors. While industry farmers experience losses from time to time, as any other crop grower does, the multitude of programs has kept profit stable, averaging 5.1% of revenue in 2012. Nevertheless, “as the provision of these subsidies becomes uncertain over the next five years, vertical integration among sugarcane farmers and downstream processors will likely become more common,” says Kruchkin. As of now, most farms are small, family-run operations, giving the Sugarcane Harvesting industry a lower market share concentration. With costs potentially coming under pressure from decreased government protection against imports, farms will seek to grow economies of scale.
The industry is headed for some major challenges over the next five years. In addition to slower growth in prices, increasingly health-conscious consumers will likely turn to low- and no-calorie sweeteners – both artificially and naturally derived. The growing presence of alternative products in the sweetener market will increase competition for sugar processors, which will subsequently hurt the Sugarcane Harvesting industry. Over the next five years, revenue is forecast to grow marginally only marginally. However, an opportunity for the industry lies in commercial ethanol production. Currently, bagasse, a by-product of sugarcane processing, is used to self-sustain sugar mills in the United States. Thus, if ethanol production from bagasse is pursued on a larger scale, it will revive demand for the industry. For more information, visit IBISWorld’s Sugarcane Harvesting in the US industry report page.
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IBISWorld industry Report Key Topics
Farmers in this industry primarily grow sugarcane, a tall tropical grass originating in Southeast Asia. Scientifically known as Saccharum officinarum, its thick stems are a major commercial source of sugar.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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