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 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

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

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!