Analyst sees positive signs for U.S. sugar market

Sugar beets grow in American Falls, Idaho. Experts say beet growers in the U.S. should enjoy stable prices, thanks to a recently renegotiated agreement with Mexico, despite an expected global glut of sugar.

NAMPA, Idaho — U.S. sugar beet growers are poised for a profitable year despite expectations of a large global sugar crop, market analysts with Rabobank predict.

A new report from the Rabobank Food & Agribusiness Research and Advisory Group estimates the world’s sugar growers will overproduce by 2.7 million metric tons in the current crop year.

But U.S. sugar prices should avoid downward pressure from the expected international glut, thanks largely to a recently renegotiated agreement addressing the dumping of subsidized Mexican sugar into the country, explained RaboResearch sugar analyst Stephen Nicholson.

Nicholson said the outlook is for increased production in major sugar-producing countries — including Brazil, India and Thailand.

Domestically, however, USDA estimates U.S. sugar farmers cut their beet acres by 2.7 percent and their cane acres by 3.4 percent. Adverse growing conditions in U.S. sugar production areas should also reduce sugar output, Nicholson said. He said the weather has been especially dry in Minnesota, Montana and the Dakotas, and a turn to humid weather could raise disease pressure.

Duane Grant, chairman of the board with Idaho-based Snake River Sugar Cooperative, said his company’s growers planted late in Vale, Ore., Weiser, Idaho, and pockets of the Magic Valley, due to heavy snowpack and storms.

“Probably 10 to 15 percent of the company’s fields were planted in challenging conditions,” Grant said, adding delayed planting also affects how plants take up nitrogen and produce sugar content. “We’re probably not looking at record yields, but I think it will be a decent crop.”

Pest pressure could also pose challenges for growers in Idaho’s Treasure Valley, where Amalgamated crop consultant Kevin Fouldger has reported finding loopers, armyworms and false celery leaftier.

Nicholson said there’s also been a recent narrowing of a price gap that developed in the U.S. between sugar cane and sugar beets, which some buyers have avoided because most of the crop comes from seed produced with biotechnology.

The five-year average ending with the 2016 crop year shows a 0.3 percent reduction in beet sugar deliveries for human use and a 3.1 percent increase in cane deliveries, Nicholson said. More recently, he said beet sugar got cheap enough that buyers purchased most of the remaining 2016 crop inventories from beet processing companies. Furthermore, prices have risen about 1.5 cents since the early June updated agreement with Mexico, now at 32 cents per pound for refined beet sugar delivered to the Midwest.

U.S. sugar policy places quotas on sugar imports allowed from specific countries. The recently renegotiated agreement with Mexico raises minimum prices for Mexican sugar sold into the U.S., increases the percentage of Mexican exports that must be sent unrefined to supply U.S. refineries and adjusts the purity standard at which sugar is considered to be refined.

Nicholson said U.S. sugar policy should keep the domestic market “well insulated” from the global market.

“I am cautiously optimistic U.S. prices of sugar will continue to move up, particularly on the beet side, because they have been down so low, and we’ve had a reduction in acreage,” Nicholson said.

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