Santa Ana Pueblo, NM, August 3, 2015 – American sugar beet and cane growers and sugar processors will polish their strategy and shore up their defenses on several fronts at their annual summer meeting, running through midweek here.
For sugar producers, “there are always challenges on the Congressional front, the trade policy front and the market front,” says Jack Roney, economist and veteran analyst for the American Sugar Alliance, which hosts the conference.
But the outlook is hardly dreadful. Favorable weather in U.S. beet growing areas spells a strong crop again this fall, so production will be up despite a dip in acreage. Cane crop yields, too, were plentiful in the fall-through-spring harvest recently ended, and steady production is expected for the next harvest. Meanwhile, bulk refined sugar is running about 34 cents a pound, which Roney says is at least a break-even level for most producers.
Also, in Congress, where moves by some lawmakers to upend the long-standing national sugar program are perennial, recent efforts to do so via amendments to the annual agricultural spending bills recently sputtered out. That means changes for the sugar program, which limits imports as a means of supporting domestic market prices, will lie in wait at least one more year.
In fact, on Monday, the Senate Agriculture Committee Chairman, Sen. Pat Roberts (R-KS), and Sen. Debbie Stabenow, the panel's ranking Democrat, firmly promised the same in a video message to the conference. "I have no intent of reopening and redebating the farm bill" to allow any change in the sugar program, Roberts declared. Says Stabenow: The farm bill's sugar provisions are "locked in with certainty."
What’s more, producers are hopeful that a quota negotiated late last year on Mexican sugar exports to the U.S. will be extended for five years. Mexico agreed on limit of 1.54 million tons of sugar to the U.S. while the U.S. agreed to lift punitive import duties it began imposing on Mexico’s shipments in 2014 after it had a huge 2013-2014 cane crop and sold more than 2.1 million tons into the U.S. A final ruling by the U.S. International Trade Commission favoring U.S. producers and confirming unfair practices by Mexico means the so-called “suspension agreement” that limits Mexico’s shipments will continue for five years.
Producers also hold high hopes that final negotiations for the 12-nation Trans-Pacific Partnership will not seriously cripple the U.S. sugar program, despite insistence by Australia, Canada and Vietnam that the U.S. further lift its restraints, allowing more foreign sugar to flow in. Though U.S. trade negotiators may ultimately have to grant additional market access, Roney says, “What gives us a certain amount of calmness on this matter is that [U.S. Trade Representative Michael] Froman has repeated said publically . . . that he will not make a concession that will harm the sugar program.”
Nonetheless, U.S. sugar producers are increasingly nervous, however, about foreign sugar production elsewhere. Brazil, long the leading cane sugar producer, has continued its usual output, but some other big producers are ramping up output: Thailand’s harvests are up 15 percent since 2010, India’s is up 9 percent, and Vietnam, up 37 percent, sending overall world output up 13 percent in the same period. Such increases are being spurred by new export subsidies by those countries, Roney says, and “they are the reason the price of sugar keeps dropping . . . despite the fact that we’ve got world prices now running about half of cost of producing sugar.”
He says the average production cost for raw sugar is about 24 cents a pound, while the world prices has slumped to 12 cents. In fact, the world index sugar price posted by the UN Food and Agriculture Organization has shrunk for five years and is now down more than 50% since 2011. Roney expects that prices will stay depressed if countries heavily subsidizing cane crops and sugar exports continue to do so .