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Home  »  Ag Sectors

Supply glut likely to keep sugar beet prices low

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By JOHN O'CONNELL



Capital Press



Amalgamated Sugar Co.'s chairman of the board, Duane Grant, believes prices of the next sugar beet crop will remain depressed due to USDA's choice about a year ago to raise import quotas.



However, Grant, a Rupert, Idaho, grower, sees opportunities for the agency to make amends through supply-management strategies, such as purchasing finished sugar for ethanol production.



Last April, at the urging of sugar buyers concerned about a tight supply, the government allowed an extra 400,000 tons of sugar to be imported above its 1.5-million-ton quota.



Grant said the government acted with uncharacteristic haste, without consulting the sugar industry. At harvest, U.S. sugar beet growers and Louisiana sugar cane producers reported record yields for the 2012 crop. Mexico also had a strong sugar cane crop, further depressing prices.



On March 28, sugar traded at 17.66 cents per pound for the May 2013 contract month, down 2.9 cents from August, according to World Bank.



"This price erosion that is driven by a marked increase in sugar imports into the U.S. has moved sugar beets from being a profitable crop to now being a marginal to unprofitable crop as growers look at 2013," Grant said.



USDA estimates the stocks-to-use ratio for sugar is above 20 percent, which shows "a glut on the market," said Idaho Sugar Beet Growers Association Executive Director Mark Duffin. The ratio measures the amount of extra sugar beyond the estimated annual U.S. consumption. Duffin would prefer a ratio no higher than 13 percent.



The sugar industry has asked USDA to implement a farm bill provision diverting some finished sugar to supplement corn in ethanol production.



"Sugar can be blended very easily at up to 15 percent of the feed stock stream in an ethanol plant without many changes," Grant said.



Grant noted U.S. sugar prices, typically higher than elsewhere in the world, are now at or below global prices. He encourages USDA to grant foreign exporters the option to sell sugar to other countries without forfeiting future rights to sell to the U.S.



Grant also sees promise in the government's Payment in Kind program, last used for sugar in 2002. Through a competitive bidding process, the program awards sugar seized due to defaulted loans to producers willing to destroy some of their own crops.



USDA responded: "At this time, the USDA has not made any determination on sugar surplus reduction, the methods to achieve it, or the disposition of the surplus."



Grant said Amalgamated has sought to advance its own cause by reducing growers' acreages by 4 percent, and allowing growers the right to curb production by an additional 3.5 percent without sacrificing shares in the company.



According to the USDA's March 28 planting intentions report, Idaho growers intend to plant 176,000 acres, down 4 percent, and U.S. growers intend to plant 1.2 million acres, down 2 percent.



"I suspect the actual reduction in the number that comes out post planting should be somewhat larger than the projection," Grant said. "The sugar market has continued to soften even as the data was being gathered. Other (crops) are profitable, and beets are not."



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