I missed this report from a few days ago, but an eagle-eyed reader pointed it out:

The United States is facing a major sugar shortage, according to the Wall Street Journal (subscription may be required).

On Aug. 5, General Mills, Hershey Co, Mars Inc., and Kraft Foods alerted Thomas J. Vilsak, the secretary of the U.S. Department of Agriculture, of their combined forecast of low sugar supplies. These food companies warned that if the Agriculture Department does not allow them to import more tariff-free sugar, “our nation will virtually run out of sugar” and they will be forced to raise consumer prices and lay off workers.

This comes as a major eye opener, but there’s more to this finding.

The WSJ states that the present trade quota places a limit to the number of tariff-free sugar that can be imported per year, with the exception of Mexico. This leaves major suppliers like Brazil out of the free trade mix. The fear looms that Brazil may not even have significant sugar supply for the U.S. because they are busy using large amounts of cane crop for ethanol use.

Another problem is the U.S. government; not a surprise. The U.S. artificially inflates domestic prices of sugar in order to support the incomes of farmers in the Midwest who are friendly with politicians who help them. Anything for a vote, right?

Economists state that sugar is part of the equation. Sugar is an active ingredient in almost all foods, and the impact of a price increase will be big. Food companies pay twice the world level for sugar because of government meddling.

Then there is this via SurvivalBlog. Sugar prices are expected to rise 80%:

Aug. 14 (Bloomberg) — Sugar may climb 80 percent to as high as 40 cents a pound on global supply shortages, said Singapore-based commodity hedge fund manager Michael Coleman.

“Sugar is caught in a perfect storm,” he said in a Bloomberg Television interview. There is “a big hole” in world supply and no obvious solution in the next six to nine months, said Coleman, 49, managing director of Aisling Analytics, which runs a $1.4 billion fund invested in energy and agriculture.

The sweetener has already surged 88 percent this year, reaching a 28-year high, as India, the biggest consumer, had its driest June in 83 years and parts of Brazil, the largest grower, were drenched by rainfall four times more than normal, too wet to harvest. World demand will exceed output by as much as 5 million metric tons in the year ending September 2010, according to the International Sugar Organization.

“Is there a possibility of reaching 40 cents a pound? Certainly,” said Coleman, whose fund returned 24 percent in 2008. “From this point on, it depends how price affects demand.” Sugar reached a peak of 23.33 cents a pound in New York on Aug. 12 and ended at 22.21 cents yesterday.

Meaning the prices you pay will increase at least 80% but likely much more. Stock up if you have room in your pantry.