New York, June 25 - The $1.75 billion deal that will eventually put U.S. Sugar Corp in Florida out of business is not likely to cause a shortage of the sweetener in the United States, industry officials said Wednesday.
The state of Florida announced on Tuesday it intends to spend $1.75 billion to buy a large chunk of Everglades land from U.S. Sugar, one of a number of sugar companies blamed for polluting the precious wildlife habitat.
U.S. Sugar Corp, one of the largest privately held U.S. agriculture firms, will abandon its Florida sugar plantations and go out of business in six years, handing over about 187,000 acres (75,680 hectares) of farmland to the state's efforts to restore the Everglades, company and state officials said.
According to the U.S. Agriculture Department, Florida will produce 1.865 million short tons of sugar in the 2008/09 marketing year (August/July). Of that total, U.S. Sugar Corp accounts for about 600,000 to 700,000 tons.
Analysts said the question for the trade would be how the potential shortfall will be made up.
"There are several options," Frank Jenkins of the Jenkins Sugar Group, which does extensive business in the U.S. domestic sugar market, told Reuters in an interview.
A large U.S. beet crop could make up the amount along with sugar imports that will be allowed from regional trade agreements like NAFTA (North American Free Trade Agreement) or CAFTA (Central American Free Trade Agreement), he added.
"Most of (the alternate supply) is likely to come from Mexico," Jenkins said. Under NAFTA, all restrictions on U.S.-Mexico sweetener trade ended on Jan. 1.
Phillip Hayes, spokesman for the industry group American Sugar Alliance, said in a separate interview there are still several questions on the time frame and the reduction of acreage over the U.S. Sugar Corp deal.
But he said the United States is "not going to have supply shortages" of sugar when the deal is finalized by the middle of the next decade because any gap can be made up domestically or through regional sugar agreements like NAFTA.
The USDA estimated U.S. 2008/09 beet sugar production at 4.4 million short tons. Two seasons ago, it stood at 5.008 million tons.