What could be sweeter? Not dry fructose, says US sugar industry

Much to the chagrin of the US sugar industry, the future for corn sweeteners is crystallizing. Corn refiners are already successfully marketing a liquid sugar substitute, high-fructose corn syrup. The next step, they say, is a crystallized version.

That prospect comes at a sour time for the domestic sugar industry, already reeling from competition of high- fructose corn syrup.

Although still a few years away, many sugar industry analysts say inexpensive crystallized fructose is inevitable.

Current technology can only produce an expensive form of the dry fructose. Hoffman La Roche Inc. of Des Plains, Ill., for example, sells it for about six times the price of sugar.

But a cheaper method may soon be available.

A genetic research firm in Berkeley, Calif., Cetus Corporation, has developed a method using bacteria as well as chemicals that could significantly reduce costs. Within the next two years Cetusplans to build a pilot plant to test the method, says vice-president William F. Amon Jr.

If commercially feasible, he says, crystallized fructose could be on the market in four to five years and provide a major challenge to the sugar industry.

A lot of "ifs" still surround the project, but the possibility alone troubles an already bitter domestic sugar industry because:

* Annual per capita sugar consumption in the United States is down more than 16 percent from a decade ago, US Department of Agriculture figures show.

* Since 1974 the number of sugar processors has dwindled from a high of 118 to 90.

* Analysts predict a further slide in sugar consumption as high-fructose corn syrup captures an even greater share of the sweetener market.

From 1975 to 1980, estimated US deliveries of the syrup have quadrupled, according to Stephen W. Vuilleumier, an analyst with the McKeany-Flavell Company in San Francisco.

Corn sweeteners as a whole (including glucose and dextrose) now make up one-third of the sweetener market, he says. He predicts that by 1985 the expansion of high-fructose corn syrup could push that figure up to 48 percent.

"The bottom line is that the overall size of the US sugar industry will be reduced," Mr. Vuilleumier says.

The dramatic increase comes from the soft-drink industry and other major sugar users switching to the corn syrup, which runs a stable 15-to-25 percent cheaper than sugar.

Instead of unifying the industry, however, the present decline and potential for further reductions have bitterly divided sugar producer and refiner groups.

"The argument is: Whose hide is that [reduction] going to come out of?" says Van Olsen, director of public affairs for the United States Sugar Beet Association.

US producers want to sell as much sugar as possible and reduce imports, he says, while most refiners want to buy the cheapest sugar possible on the world market. In 1980, sugar imports made up nearly 50 percent of consumed sugar.

So battle lines are being drawn over the sugar section of the omnibus farm bill, scheduled to come before the Senate later this month. The bill would establish a loan program qualifying producers for lower-than-market-interest loans when sugar prices were depressed.

The proposal would establish a minimum price of 19.6 cents per pound for American sugar -- about 3 cents higher than the current world price.

Without the loans, producers could not afford to wait out short-term price depressions, Mr. Olsen says. If the US had to import all of its sugar from the relatively small international market, the increased demand might force prices much higher than the rate American producers are asking.

But US refiners say the program would force the government to borrow $1 billion to finance the loans, would benefit only a few large corporations, and would establish at least a 24-cent minimum price for raw sugar once transportation and other costs were factored in.

"It's an absolute outrage," says Nicholas Kominus, president of the US Cane Sugar Refiners' Association. "If this program went through, it would be a disaster for our industry."

Higher sugar prices would force sugar users to switch even more quickly to high-fructose corn syrup, he says.

At this stage, crystallized fructose remains only a possibility. Even if theoretically competitive, Mr. Vuilleumier warns that capital costs of building new plants might be too high to translate a theoretically feasible process into a marketable reality.

In any case, analysts do not predict a total replacement of sugar.

Bakers will still use it in angel food cake, for example, because corn sweeteners when baked have a browning effect. Ice cream may also continue using sugar, because it does not lower the freezing point as much as corn sweeteners.

What bothers US producers in the short term is that foreign producers might be the ones to fill that sugar bowl; in the long term, corn sweeteners may fill it.