Sugar Shortages Prelude to Further Food Supply Issues

This paired with our report yesterday regarding other agricultural commodity increases should be setting off the warning bells.

U.S. Food Giants Warn of Sugar Shortage: Report

(Reuters) - Large U.S. food companies said the country could "virtually run out of sugar" unless the Obama administration eased import curbs, the Wall Street Journal said.

In a letter to Agriculture Secretary Thomas Vilsack, the companies -- including Kraft Foods Inc (KFT.N), General Mills Inc (GIS.N), Hershey Co (HSY.N) and Mars Inc -- said there could be a severe shortage of sugar used in chocolate bars, breakfast cereal, cookies, chewing gum and thousands of other products, the paper said.

The companies warned they would hike consumer prices and lay off workers if the agriculture department did not allow them to import more tariff-free sugar, the paper said.

Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico, suppressing supplies from major producers such as Brazil, the paper said.

Sugar prices are poised to hit 30-year highs on a perfect storm of huge Indian imports and tight supplies.

The U.S. Department of Agriculture, Kraft, General Mills, Hershey and Mars did not immediately return calls seeking comment that were made outside regular U.S. business hours.