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Sugar beet price outlook weak in near term

Carol Ryan Dumas

Capital Press

An oversupply of sugar in the U.S. and abroad dropped the sugar beet price 21 percent this year to $40 a ton. Prices will remain weak in the near term until sugar supplies work through the system. But the potential loss of the sugar title in a new farm bill could have long-term consequences for the U.S. sugar industry.

BURLEY, Idaho — Idaho’s sugar beet growers suffered a tough year in 2013, with the price for their crop falling 21 percent to $40 a ton – the lowest since 2007.

With a global sugar supply glut caused by large sugar cane crops in Asia and Brazil this year, growers can expect low prices to linger in the near term, said Paul Patterson, University of Idaho ag economist, during the University’s ag outlook seminar in Burley on Dec. 11.

It’s a matter of how long it’s going to take to work that sugar through the system, he said.

The world sugar price dropped 18 percent this year, from 28 cents a pound to 23 cents, and dropped 30 percent from 33 cents in FY 2011, he said.

That decline brought the U.S. price for wholesale sugar beet sugar down 41 percent this year, from 49 cents to 29 cents per pound, and down 48 percent in the last two years from 56 cents in FY 2011.

Declining prices are also the result of this year’s increase in U.S. sugar production from both sugar cane and sugar beets. Sugar beet production set a record this year.

A 98 percent increase in sugar imports from Mexico in FY 2012, following a 37 percent decline the previous year, also helped push U.S. market prices down this year, Patterson said.

The U.S. government spent $51 billion this summer buying sugar in an attempt to support sugar prices and reduce defaults on USDA loans, selling the sugar to ethanol producers usually at a loss. But the program was not effective in raising sugar prices above breakeven default levels, and sugar processors forfeited some of their production to the government, he said.

Market fundamentals are expected to keep sugar prices weak in the near term, with a possible slight improvement in the 2014/15 marketing year, he said.

A big uncertainty, however, is whether the sugar title will be maintained in a new farm bill, he said

U.S. sugar producers can’t compete against sugar cane produced in countries that aren’t subject to the cost of U.S. labor and environmental regulations or against subsidized sugar dumped on the world market, he said.

Without a domestic sugar program, the U.S. industry could see a replay of the 1970s when the Utah-Idaho Sugar Co. closed a plant in Idaho, one in Utah and two in Washington, he said.

According to the American Sugar Alliance, 103 sugar mills, refineries and processing plants have closed since 197, leaving only 48 remaining in 2013. Since passage of U.S. sugar policy in the 2008 farm bill, which sought to balance domestic supply and demand, the widespread closures that plagued the industry have largely subsided, with only two processing plants shutting their doors.

Patterson projects 2014 sugar beet prices between $38 and $45 a ton, but lack of a sugar program could mean a lower price. If the sugar title is maintained and there is a government loan program this coming year, it would put a floor price under sugar beets in the high $30s per ton, he said.



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