Global sugar prices soar, US faces “even higher costs”: Food giants such as General Mills (GIS.US) sue sugar industry oligarchs for price manipulation

According to Zhitong Finance APP, General Mills (GIS.US), Mars, and McKee Foods have recently joined the wave of antitrust lawsuits within the U.S. food industry, accusing top U.S. sugar producers of colluding to inflate sugar prices. In the lawsuit filed with the Chicago federal court, these companies accused American Sugar Refining (ASR) and United Sugar Producers & Refiners of reporting “competitively sensitive” pricing and sales data to independent market analysis firm Commodity Information Inc., which then published this information to its sugar company subscribers, effectively coordinating activities.

The U.S. sugar refining industry is highly concentrated, with a handful of producers controlling most of the market share. Combined with longstanding government-imposed import restrictions, this provides the sector with a natural protective barrier. General Mills, Mars, and McKee Foods claim that sugar producers “share each other’s pricing, sales data, and future strategies in real time,” amplifying the anti-competitive effects of existing policies.

American Sugar Refining spokesperson Marianna Martinez dismissed these allegations on Tuesday. She stated that this lawsuit, filed last Friday, is merely “a repackaging of the same baseless accusations that have existed for about two years. This is just yet another group of plaintiff attorneys carving out parties they already represent in pending litigation. As in previous cases, the facts do not support their claims, and we will demonstrate this in our defense.”

Global Sugar Prices Soar—U.S. Market Even More Expensive

The persistently high U.S. sugar prices have long been a major pain point for food companies, which use this sweetener in products ranging from peanut butter to pasta sauce. They argue that paying a premium for such a globally abundant commodity increases consumer costs and drives food manufacturing overseas.

Globally, sugar prices are rising rapidly. Data shows that sugar prices surged by 21.5% in August, marking the strongest monthly gain since October 2010 (when prices rose 24%). The UN Food and Agriculture Organization (FAO) Food Price Index also rose in August, with sugar posting the biggest increase among all soaring commodities. In a recent report, the FAO noted: “The surge reflects expected declines in EU sugar beet yields due to adverse weather, El Niño’s impact on production prospects for major Asian sugar producers, falling sugar output in Brazil, and India’s announcement of duty-free raw sugar imports, among multiple factors.”

Against this backdrop, the U.S. market stands out as even more extreme. Raw sugar futures delivered to U.S. ports typically trade at more than double the global export benchmark. Besides global supply pressures, U.S. domestic sugar prices are also supported by a longstanding import restriction system—U.S. sugar is strictly protected, and candy manufacturers and processed food producers can import only a certain amount of raw and refined sugar, or else face high tariffs. These decades-old rules aim to protect American farmers’ profits and prevent other countries from flooding the U.S. market with sugar. However, critics argue that these regulations also artificially drive up U.S. sugar prices, imposing a heavy burden on American candy companies and refineries trying to operate domestically. Additionally, declining U.S. processing capacity has further aggravated supply shortages.

Focus on Consolidation in Agriculture; Multiple Lawsuits Pending

As the U.S. midterm elections approach, inflation has become one of voters’ top concerns. Against this backdrop, consolidation in agricultural sectors—including eggs and meat processing—has become a focal point for multiple lawsuits and government investigations. However, the reasons behind high food prices are complex, with soaring fuel costs and extreme weather both playing a role.

Other food producers and grocery retailers have filed lawsuits that are being consolidated in federal court in Minnesota. Last year, a judge in that court allowed the antitrust case against American Sugar Refining and United Sugar to proceed, but dismissed cases against some smaller producers.

Supermarket chains such as Albertsons (ACI.US) and other food companies such as Mondelez (MDLZ.US) also filed similar lawsuits earlier this year against the sugar companies and Commodity Information.