Downstream processors are protected by government price supports, which inflate domestic sugar prices
New York, NY (PRWEB) December 20, 2014
The US Sugarcane Harvesting industry has experienced spikes and drops in revenue over the five years to 2014. 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 2011. However, increased production caused an oversupply of sugar, pushing down the commodity's price beginning in 2012. As a result of falling prices, industry revenue has fallen in the five years to 2014.
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). According to IBISWorld Industry Analyst Antal Neville, “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 all other crop growers do, the multitude of government support programs has kept profit relatively stable, though margins have declined slightly with low sugar prices.
Nonetheless, the industry is headed for 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 industry,” says Neville. Over the next five years, revenue is forecast to grow. 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 &amp;amp; Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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