Alexander & Baldwin Inc (ALEX), The Hershey Company (HSY): Your Wallet’s About to Get Hit at the Checkout Line

Page 1 of 2

U.S. sugar producers are bemoaning low-cost sugar imports from Mexico. After our trading partner increased sugar shipments to the U.S. from 6 million metric tons to 8 million during last growing season, producers said prices were pummeled, and it created instability in the sugar market.

Mind you, U.S. consumers pay twice as much as the rest of the world does for its sugar because the federal government subsidizes the industry and imposes ridiculously high tariffs on imports. In fact, sugar is the only major U.S. agricultural commodity for which the government takes a proactive position in managing imports. A few years back, when sugar prices were soaring, there was no similar complaint from the industry about the “volatility” they were experiencing.

Yet under the North American Free Trade Agreement, Mexico is exempt from the quotas and tariffs, so the influx of sugar from south of the border caused stockpiles to rise even though U.S. production was curtailed as a result of a dry growing season and a problem with discolored sugar at American Crystal Sugar. It still tasted sweet, but no one really wants off-color sugar.

Alexander & Baldwin Holdings Inc (NYSE:MATX)And producers such as Alexander & Baldwin Inc (NYSE:ALEX) Hawaiian Commercial & Sugar were already feeling the impact of a depressed market as Brazil and Thailand engaged in a price war that boosted production amid a worldwide supply glut. It produced 15% more sugar last quarter but sold almost 2% fewer metric tons, and though its agribusiness recorded higher profits, they were offset to a large extent by lower sugar prices and volumes.

So news that Mexico’s soft-drink industry was voluntarily buying up 400,000 metric tons of sugar was a welcome reprieve, even though the Mexican sugar industry’s trade rep said most of the exports to the U.S. were estandar sugar, or a raw, less refined product, and not white sugar.

That’s not likely to be a sweet sound to sugar users, however. A coalition of food and beverage manufacturers has pushed for reform of the subsidies being paid to producers to help their own bottom line.

The Hershey Company (NYSE:HSY), for example, saw a 290-basis-point increase in profit margins as a result of lower commodity costs in the second quarter, and year to date those lower costs have pushed adjusted gross margins 260 basis points higher. The Coca-Cola Company (NYSE:KO) switched to high-fructose corn syrup and aspartame years back because it’s cheaper than sugar, but it has also seen its so-called “Mexican Coke” — the sparkling beverage made with real sugar — develop something of a cult following. PepsiCo, Inc. (NYSE:PEP) itself introduced its “throwback” style of soda that’s made with real sugar to satiate the thirst of consumers looking for better taste.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!