By Mikkel Pates, Forum News Service, Published March 14 2013
Annual Sugarbeet Institute addresses problems with low sugar prices
Luther Markwart, executive vice president of the American Sugarbeet Growers Association, who describes himself as an “eternal optimist,” listed a number of negative trends for the sugar industry on Wednesday in an address at the 51st International Sugarbeet Institute in Fargo.
Markwart said sugar prices have plunged from extremely high levels of the past two or three years. Prices now are heading to “forfeiture” levels – where companies can forfeit sugar to the government when prices fall below loan levels.
“The administration is looking at all kinds of options about how we can avoid forfeitures,” Markwart told a room full of farmers and industry operatives.
Sugar prices were extremely high in 2011 and 2012 because of droughts in Brazil, India and Australia, and tight inventories around the world, Markwart said. The U.S. Department of Agriculture was conservative about sugar imports because of a still-new free trade deal with Mexico, he said.
But last April, Agriculture Secretary Tom Vilsack allowed an extra 450,000 tons of sugar into the U.S. because of under-estimates of Mexico sugar coming into the country. Now, with a beet and cane sugar bumper crop in the U.S. and a big crop in Mexico, prices are heading down.
Markwart listed a couple of perils for sugar:
E Recent congressional efforts to dismantle the sugar program – failing by increasingly slimmer margins. With redistricting, Republicans have increased their hold on congressional seats for the next 10 years, which will probably lead to more partisan division.
E Sugar consumers – burned by high prices – are motivated, organized and coordinated to get rid of the sugar program because they felt the effects of 71 percent increases in sugar prices.
“(High prices) shifted close to $3 billion a year from the ‘users’ to your side of the ledger,” Markwart told the farmers. “That helped you pay off a lot of debt, replace a lot of equipment and do all those very good things, but what it did was it stirred all of the users in all of the congressional districts.”
Kevin Price, a lobbyist for American Crystal, said the cooperative has no outstanding loans under the U.S. sugar program, so likely is not in danger of forfeiture.
As the market sours, though, a loan is becoming more of a possibility.
“It’s certainly risen on the list of options we are looking at, and we might,” Price said. “But that decision has yet to be determined.”