The industry relies on subsidies for steady profit, though revenue fluctuates wildly.
Los Angeles, CA (PRWEB) December 19, 2013
The US Sugarcane Harvesting industry has endured spikes and drops in revenue over the five years to 2013. 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. Consequently, the disruption in the global supply of sugar boosted demand for US downstream sugar products. As a result of the ensuing price hikes, growers increased production, and revenue for the sugarcane-harvesting industry shot up from 2008 to 2012. However, increased production caused an oversupply of sugar, dropping the commodity's price in 2012 and 2013. As a result, industry revenue has grown an annualized 11.6% in the past five years, though this includes a 12.9% drop in 2013, totaling $1.5 billion in 2013.
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. According to IBISWorld Industry Analyst Antal Neville, “While industry farmers experience losses from time to time, as any other crop grower does, the multitude of programs has kept profit relatively stable, though profit declined slightly with low 2013 sugar prices.”
Nonetheless, 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,” says Neville. Over the next five years, revenue is forecast to grow 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.
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IBISWorld industry Report Key Topics
Farmers in the Sugarcane Harvesting 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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