Sugar prices may sour ice-cream makers
That ice cream cone in your hand on the hot Fourth of July. Its price won't stay frozen for long, if it hasn't soared already. Reason: sugar.
The average retail price of sugar is headed up 45 to 50 percent this year over last year's average, top food-price economists say, soaring way above increases for all other food staples.
Already, in the past year, increasing consumption and bad weather in the Soviet Union, Cuba, and parts of sugar-producing Europe, have pushed world raw-sugar prices up about 300 percent. On June 20, for instance, this raw-sugar price was about 33 cents a pound, compared with just 8 cents a pound at the same time last year.
And although US consumers are insulated from the full brunt of the world price increase because of federal price supports, the retail price has gone up about 55 percent in the last year, according to Jason Benderly, an agricultural economist with the Washington Analysis Corporation. This is the biggest yearly price jump since the early 1970s.
Taking a closer look at this 55 percent average national retail hike, Mr. Benderly said that 45 percent is due to the rise in raw-sugar prices and 10 percent to "value added: price increases. The latter include higher energy and labor costs associated with packaging and transporting the product.
In New York, however, which has higher labor and energy costs than many other parts of the nation, the price of a five-pound bag of sugar went up 71 percent in the past year, up to $2.45, according to a survey by the city's Department of Consumer Affairs, which has now begun to urge New Yorkers to reduce their consumption as one means of reducing prices.
But besides the average shopper there's a special group of people who are perhaps even more concerned about higher sugar prices: America's ice cream manufacturers.
Although ice cream consumption (not including ice milk) in America went from 815 million gallons in 1978 to 818 million gallons last year, manufacturers are concerned that recent price hikes caused by sugar increases could dampen this year's sales.
The higher price of sugar not only places "upward pressure" on ice cream prices but also "tends to create competitive pressures between the ice cream industry and, for instance, the pastry industry," says David Beren, an economist with the International Association of Ice Cream Manufacturers.
This is not to say that the two industries have quite resorted to throwing cones and pies at each other, but Mr. Beren explains, since ice cream uses more sugar than most pastry, some consumers may choose to buy pastry instead of ice cream becuase it has gone up a lot less.
In 1973-74 sugar prices rose so much that a national consumer boycott developed. The world market price had risen from about 2 cents a pound in 1970 to about 66 cents a pound four years later. But as world production rose again, prices dipped back to between 6 and 8 cents a pound between 1976 and 1979.
Now, history seems to be repeating itself, with this exception: No nationwide boycott seems to be in the works because the price inreases of other items have numbed the same kind of boycott fever since the early '70s when the world price of sugar was about double what it is today.
Nevertheless, overall food prices this year are expected to go up only 8 to 9 percent, compared with 45 to 50 for sugar.