News Column

Sugar beet growers cautious of supply predictions

May 27, 2014

By Jonathan Knutson, Agweek Magazine



May 27--The possibility of stronger down-the-line sugar prices sounds good, but it's too early to take higher prices for granted, Red River Valley sugar beet officials say.

"Whether we see any improvement or not, remains to be seen," says Paul Rutherford, a Euclid, Minn., farmer and president of the Red River Valley Sugarbeet Growers Association. "When there's production problems in one area, another region of the world seems to step up (and produce more)"

The Red River Valley of eastern North Dakota and western Minnesota is the nation's leading sugar beet producing area. At current sugar prices, which stand at their lowest levels since the 1980s, Red River Valley growers will struggle just to break even this year, producers say.

But price relief might be coming, according to a recent article by Reuters.

The world sugar market, which has had three straight years of big surpluses, could be headed to a small deficit in several years. That should bolster world sugar prices, although the process won't happen overnight, according to the article.

The article found that world sugar demand is rising 2.2 to 2.5 percent annually, with China and other Asian countries accounting for much of the economy.

"The world's economy is getting stronger, and consumers like to use a little more sugar," William Hejl, an Amenia, N.D., sugar beet farmer and a past president of the World Association of Beet and Sugarcane Growers tells Agweek.

Production problems

The Reuters article also points to production problems worldwide. A long drought in Brazil, the world's leading sugar producer and exporter, has hampered sugar cane planting.

Also, Brazil is shifting more of its sugar cane production into ethanol, says Jack Roney, director of economics and policy analysis for the American Sugar Alliance, a sugar industry group based in Washington, D.C.

And the prospects for a bad monsoon season in India, the world's second-largest sugar producer, has cut into planted acreage.

Sugar prices have rallied recently, at least partly in response to the factors cited by Reuters. Raw sugar futures stood recently at 18.28 cents per pound, up from a low of 14.7 cents early this year. Even so, the current price is only half of what it was in early 2011.

Prices of sugar, like those for other agricultural commodities, are cyclical, says Nick Sinner, executive director of the Red River Valley Sugarbeet Growers Association.

"We don't wish ill on any part of the production world," he says "But the fact is, production goes up and down. That will affect our prices here."

"It's a tough time for the growers right now," he says "But we're hoping that consumption will continue to increase and we can get back to some reasonable prices for the sugar we're producing."

The Reuters article doesn't mention the formal complaint by U.S. sugar producers that they've been hurt by subsidized sugar imports from Mexico. The U.S. International Trade Commission recently issued a preliminary ruling in favor of the U.S. producers' position.

Roney says the Mexican imports definitely have lowered the price paid to U.S. growers.

Late spring, US prices

The late, wet spring, which has delayed planting in much of the Red River Valley, hurts the outlook for yields, Rutherford says.

Late-planted sugar beets generally don't yield as well as beets planted on schedule.

"When we keep getting rained on, we can't get going (in fields)," Rutherford says.

Valley beet farmers will need better-than-average yields to break even at current prices, he says.

Red River Valley sugar beet growers also battled late planting in the spring of 2013. But unusually favorable weather in August and September allowed growers to harvest an unexpectedly good crop, Rutherford says.

The odds aren't good that weather this August and September will be as favorable, he adds.

Through May 18 of this year, 29 percent of North Dakota sugar beets were planted, compared with the five-year average of 75 percent, according to the National Agricultural Statistics Service, an arm of the U.S. Department of Agriculture.

In Minnesota, 40 percent of beets were planted through May 18, compared with the five-year average of 79 percent, NASS says.

Relatively dry pockets in parts of northwest Minnesota, where many of the state's beets are grown, have allowed more planting there, farmers say

The U.S. wholesale refined sugar price, the price of most interest to Red River Valley sugar beet growers, stands at 29.75 cents per pound. The April price was 26.5 cents per pound.

The rise reflects several factors, including the late, wet spring in the Red River Valley, says Roney, with the American Sugar Alliance.

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Source: Agweek Magazine