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Shift to cane sugar would disrupt supply chains, increase

costs

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Corn syrup cheaper than sugar, widely used in U.S. food

industry

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Eliminating corn syrup to result in $5.1 bln loss in farm

revenue -CRA

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Tariffs complicate potential cane sugar imports from

Brazil

By Marcelo Teixeira and Karl Plume

NEW YORK, July 17 (Reuters) - A possible move by

Coca-Cola, and other beverage and food industries, to use

cane sugar instead of corn syrup as a sweetener would be

difficult and expensive to implement, while mostly negative for

farmers in the United States.

U.S. President Donald Trump said on Wednesday that Coca-Cola had

agreed to use cane sugar in its beverages in the country after

his discussions with the maker of the top soda pop brand.

Backed by the Make America Healthy Again (MAHA) social

movement, Health Secretary Robert F. Kennedy Jr. has been

pushing for changes in ingredients used by the food and beverage

industry, claiming the proposed substitutes are healthier.

The company already sells Coke made from cane sugar in other

markets, including Mexico, and some U.S. grocery stores carry

glass bottles with cane sugar labeled "Mexican" Coke.

In response to Trump's comment, Coca-Cola said "more details

on new innovative offerings within our Coca-Cola product range

will be shared soon."

PepsiCo ( PEP ) also said

on Thursday

it would use sugar in its products like Pepsi beverages if

consumers want it.

Industry analysts, however, said changes in the formulation of

the rest of the Coke sold in the U.S., and other beverages and

candies, would involve significant adjustments to companies'

supply chains, since corn syrup and sugar come from different

producers. It would also involve changes to product labeling,

and cost more.

"Food and beverage industries started to use corn syrup in

the U.S. in the past because of costs. It is cheaper than

sugar," said Ron Sterk, a senior editor at SOSland Publishing,

an information provider for the ingredients industry in the U.S.

He said the beverage industry uses 55% High Fructose Corn

Syrup, or 55HFCS, while bakers use 42% HFCS.

The Corn Refiners Association said the complete elimination

of high fructose corn syrup from the U.S. food and beverage

supply would cut corn prices by up to 34 cents a bushel,

resulting in a loss of $5.1 billion in farm revenue.

"The resulting economic shockwave would lead to rural job

losses and significant economic consequences to communities

across the country," CRA said.

Agricultural processors such as Archer-Daniels-Midland ( ADM )

and Ingredion ( INGR ), two of the largest HFCS

producers, grind corn at mills dotted around the Midwest farm

belt to produce corn sweetener and other goods like ethanol

biofuel. Shares of both companies fell on Thursday.

ADM is estimated to ship 4 billion to 4.5 billion pounds of

high fructose corn syrup every year, accounting for roughly 6%

to 7% of projected 2026 earnings, said analyst Heather Jones of

Heather Jones Research.

"If Coke were to shift the entirety of its HF55 usage to

cane, the cost increase would very likely exceed $1 billion

given the current price gap between HF55 and cane sugar and the

probability of very large price increases for the latter," Jones

said in a research note.

To produce one pound of HFCS, the industry uses around 2.5

pounds of corn, so a large shift in corn syrup use in the U.S.

would hurt demand for the cereal, hurting corn growers, while

probably boosting imports of cane sugar since there is not

enough produced in the U.S. to satisfy American consumers' sweet

tooth.

SUGAR DEFICIT

Around 400 million bushels of corn is used annually to make

corn syrup for drinks and other food products, representing

around 2.5% of U.S. corn production, according to U.S.

government data.

The U.S. produces around 3.6 million metric tons of cane

sugar per year, half of that in Trump's home state of Florida,

compared with around 7.3 million tons of corn syrup.

Trump's ongoing trade wars, however, would make it difficult to

cover the deficit, sugar analyst Michael McDougall said.

"It will most likely come from Brazil," he said, referring to

the world's top cane sugar producer, "but Trump just hit Brazil

with a 50% import tariff."