USDA official: To get more domestic sugar, domestic prices must be high
|By JERRY HAGSTROM|
LA QUINTA, Calif. – If sweetener users want a “sustainable” supply of domestic sugar, they will have to pay prices high enough so enough farmers will grow sugar rather than other crops, Barb Fecso, branch chief for commodity analysis at the Agriculture Department’s Farm Production and Conservation Business Center, said here today.“We only have so much land. If you want a sustainable supply of domestic sugar, you have to pay [the farmers] a price that is equivalent to their next best alternative,” Fecso told the International Sweetener Colloquium, a meeting organized by the Sweetener Users Association and the International Dairy Foods Association.
|Fecso made the statement amid concerns about the acreage in sugar and calls for more investment in refineries so that they can provide a continuous supply of sugar to the candy companies and other sweetener users that depend on them.|
USDA has forecast higher sugar production next year, but users appeared a bit unnerved by American Crystal’s decision to close a beet processing plant in Sidney, Mont., because farmers in the area were not planting enough acres with beets to make the plant viable. An American Crystal executive confirmed that the farmers who have been planting beets in that area will stop planting beets.
Sweetener users have complained for decades that they have to pay more for sugar than users in other countries, a point that is disputed by the American Sugar Alliance, the organization of cane and beet growers. The growers say the world price is a “dump” price that no one pays.
The users say that Congress should make changes in the U.S. sugar program, which is designed to keep sugar prices at certain levels, with limits on imports the main tool to achieve that. At the meeting, Rob Johansson, director of economic and policy analysis for the American Sugar Alliance, and Bill O’Conner of Watkinson Miller PLLC sparred over the issue with arguments that have been aired at these meetings for years.
Johansson said the users are making big profits while the growers are experiencing higher production costs. O’Conner said that the users will not propose ending the sugar program in the farm bill but will ask Congress to make certain adjustments to it.
Fecso said that Robert Bonnie, the Agriculture undersecretary for farm production and conservation, who spoke at the symposium, and Alexis Taylor, undersecretary for trade and foreign agricultural affairs, have joint responsibility for the sugar program and have testified they will continue to try to keep the sugar stocks-to-use ratio between the historic 13.5% to 15.5% level. The stocks-to-use ratio was 14.9% in the latest calculation by USDA. That is a high ratio but prices remain high, as they do for other commodities even when there seems to be plenty of a commodity available.
Fecso, who has managed the sugar program since 2002, noted that J.B. Penn, who was the undersecretary in charge of the sugar program in the George W. Bush administration in the early 2000s, had a policy of allowing imports so that the price of sugar would stay just above the level at which growers have the right to forfeit the sugar to the government and get a payment. But Fecso said she learned from that experience that, at that price, growers can’t afford to maintain equipment or expand processing.
The current situation is hard to compare with the past, Fecso said, because demand is so high and prices for other crops are so high. Marketing has also changed, she said. Refiners are operating at near maximum capacity so buyers believe they need to book ahead, she added. It is not up to USDA to manage these contractual relationships, she pointed out.Randy Green of Watson Green LLC, who moderated the panel, also noted that sometimes there are stocks of raw sugar but not the refined sugar that companies need to make their products. Fecso said that she is not inclined to recommend increasing the quota for refined sugar imports. The best source for additional refined sugar would be Mexico, which can send imports under the U.S.-Mexico-Canada Agreement on trade, but Mexico at present doesn’t have warehouse space to store sugar in case the United States needs it.
–The Hagstrom Report