SIOUX FALLS, S.D. (AP) — This autumn, consumers might see the cost of many organic foods rise due to fresh policies and tariffs on imported organic sugar. Manufacturers are expressing concerns that these measures will not aid sugar producers but could potentially drive some food businesses to closure.
Over 90% of the organic sugar utilized by U.S. manufacturers comes from abroad. In August, trade tariffs introduced by the Trump administration led to an increase in prices, which are set to climb further on October 1 when higher-tier duties on most imported organic sugar will begin.
The Organic Trade Association reports that a 30% hike in the price of organic sugar is anticipated, impacting the cost of producing a wide range of organic foods, from yogurts to cookies.
Annually, the U.S. is obliged under a World Trade Organization agreement to import 1,825 tons (1,656 metric tons) of specialty sugar. However, the demand for organic sugar far exceeds this amount, prompting the U.S. Department of Agriculture (USDA) to set a yearly quota for duty-free specialty sugar imports.
Last year, this quota was set at 231,485 tons (210,000 metric tons), yet even this was insufficient to satisfy demand. For the upcoming year, starting October 1, the USDA announced a quota of zero, meaning all organic sugar imports beyond the WTO requirement will incur substantial out-of-quota duties.
The USDA has stated that the limitation on specialty sugar imports aims to bolster the U.S. sugar sector. However, the department has not responded to queries regarding its new sugar import policy.
Specialty sugar policy could lead to higher prices
The limits on duty-free imports of specialty sugar plus a new 50% tariff on Brazil, which supplies 40% of the U.S.’s organic sugar, is especially difficult because organic products are already more expensive than their conventional counterparts. Growers must meet more requirements to be certified organic, such as restrictions on pesticides and fertilizers.
U.S. manufacturers say that buying domestic organic sugar isn’t an option because there is only one U.S. farm that produces the specialty crop, and converting a conventional farm to organic takes at least three years.
They warn the combined effect of the tariff and import caps may force them either to raise prices or curb production.
“It’s essentially punishing domestic manufacturers for using an ingredient that we really can’t obtain domestically, and don’t have any prospects of obtaining domestically any time in the near future,” said Britt Lundgren, who oversees government affairs for organic yogurt maker Stonyfield.
Tom Chapman, co-CEO of the Organic Trade Association, said he expects “dramatic impacts.”
“The high tier tariff is so high that we don’t see that it’s an absorbable rate of tariff, in addition to all the other tariffs that would apply,” Chapman said.
Organic food manufacturers will buy most of the imported organic sugar, though some will be offered on grocery shelves, where home bakers likely will see increased prices.
U.S. not producing enough organic sugar to meet demand
Demand for organic sugar had already been outpacing imports for the past several years but that did not spur any new domestic producers, organic food manufacturers said.
In addition to limited production, the U.S. also has limited organic sugar processing because ingredients that are certified organic must be segregated from conventional ingredients when processed.
Whole Earth Brands, a company that sells a variety of sweeteners, is anticipating a 100% increase in organic sugar costs, according to company president Nigel Willerton.
“We supply every major supermarket in the U.S. and natural food stores. We’ll see our prices go up quite considerably. There’s nothing we can avoid there,” he said.
How much prices will change depends on how much sugar is used in the product. For example, sweeteners that are made almost entirely from organic sugar are likely to see bigger price increases than dairy products, where organic sugar is not the main ingredient.
Higher sugar costs may lead some businesses to shut down
Many organic food manufacturers are smaller operations, so they are more sensitive to increases in input costs, Willerton said. Some of them may not have the margins to absorb the cost, and they’re unable to replace organic sugar substitutes because it would require product reformulation.
“We’ve got lots of small companies involved in this business,” Willerton said. “These small premium companies producing these products are literally going to find themselves priced out of the market.”
The U.S. government has long had a prominent role in sugar production with policies for setting minimum prices and generous loan programs.
Still, Chapman said he doesn’t understand what the USDA is trying to accomplish with its restrictions.
“When we looked at the USDA announcements, they were talking about domestic sugar shrinking and mills closing,” he said. “There’s only one mill. They were in operation before and they’re in operation now.”
Florida Crystals Corporation, the only organic sugar producer in the U.S., supplies 8% of the U.S. organic sugar market, up from about 2% a decade ago.
Marianne Martinez, the company’s spokesperson, said the USDA’s new specialty sugar policy “is encouraging and could result in an increase in U.S.-grown and milled organic cane sugar production if it becomes a long-term policy.”
The USDA has not announced any other initiatives to support organic growers in the meantime.
