Beet growers saw progress on price stability

By Scott Kraus, Ag Weekly correspondent
Monday, December 22, 2008 1:14 PM CST

TWIN FALLS, Idaho - First, high prices for competing crops cut acreage. Then, spring planting weather that featured high winds and cold temperatures reduced acreage yet again. Idaho’s sugar beet growers faced challenges in 2008, officials said.

“(It was) a very, very difficult spring for getting the crop planted,” said Vic Jaro, president and CEO of Amalgamated Sugar Co. in Boise.

In fact, Amalgamated n a grower-owned cooperative with farmers in Idaho, Washington and Oregon n had planned to plant 167,000 acres. It ultimately contracted for just 140,000 acres. Then it lost 17,000 acres to poor weather, leaving its total planted acreage at just 123,000, he said.

And during harvest, heavy snow fell in the Magic Valley the weekend of Oct. 10 through 12. Some places got as much as 2 feet, Jaro said.

“It may be one of the largest accumulations of snow this early in the year,” Jaro said. “... And certainly it affected our harvest operations.”

But warm weather returned shortly after the snow, and harvest wrapped in the second week of November.

“As it turns out, the crop was harvested in very good time,” Jaro said.

And the beets overcame the slow start to yield 31.5 tons an acre with a sugar content of about 17 percent. Those results are about on par with the five-year average, according to the co-op.

“We had a much better crop than we would have anticipated,” Jaro said.

Still, Amalgamated was affected by the lower-than-expected acreage. The co-op n which has sugar refineries in Paul, Twin Falls and Nampa n will have to lay off some seasonal workers earlier than usual. The Nampa plant is particularly affected, since it will only process about 60 percent of its normal amount of beets.

“There will be some level of layoffs in Nampa,” he said.

Meanwhile, this was the first year the co-op grew genetically enhanced Roundup Ready beets on a commercial scale, according to Jeff Henry, of Eden, who grows beets in the Sugarloaf area. The new beet was widely adopted. It allows the use of Roundup, a more effective weed treatment than what was used on beets before. He said conventional chemicals stall development of standard beets for a time. But that doesn’t happen with the Roundup beets.

“The crop safety on them was better than what we’d come to expect,” Henry said.

He’s uncertain, though, how much of the crop’s development was due to the Roundup beets and how much to excellent summer conditions.

“After the cold weather, it was a really good year to grow beets,” Henry said.

He said it will probably take a few years of using Roundup Ready beets to better gauge how well they work.

A highlight of the year for sugar producers was the new sugar program, approved as part of the 2008 farm law, said Jack Roney, director of economics and policy analysis for the American Sugar Alliance in Arlington, Va. Growers are pleased, he said.

“The sugar program in the 2008 Farm Bill really gives them a lot of optimism to survive over the next five-six years,” Roney said.

The program is an improvement over the prior one, he said. The 2002 farm law had the government regulate sales to match demand. That allowed producers to get returns from the market, without the need for taxpayer subsidies.

The new law adds to that in several ways that should help stabilize prices, which have stagnated for years, he said. It guarantees U.S. growers at least 85 percent of the U.S. market. That’s consistent with the 86 percent share they averaged during the six years of the 2002 farm law. That means U.S. growers won’t have to settle for less market share if trade deals allow more duty-free foreign sugar into the United States. But 40 countries still retain access to U.S. markets. And Mexico can still sell an unlimited amount of sugar into the United States under the North American Free Trade Agreement.

The government, however, will siphon any sugar in excess of market needs into ethanol plants. That should help prevent a price crash, he said.

Further, the new law requires the U.S. Agriculture Department to wait until April 1, except in an emergency, to set sales allotments for U.S. companies, Roney said. And that wait will give it a much better idea of market supply. Before, it estimated the expected sugar supplies in late summer to set sales allotments.

Companies also take out federal operating loans and pledge refined sugar as collateral. The companies can forfeit that sugar in lieu of cash to repay the loan if the price falls too far below the set “loan rate.” That price in the past has tended to become the target price.

Now, phased in over four years, that loan rate will rise by three-quarters of a cent for raw sugar. It’s the first loan rate increase since 1985, Roney said.

In addition, sugar consumption rose 6 percent this year after the no-carbohydrate diets faded, he said. That has helped boost the price for wholesale refined beet sugar from 25 cents a pound a year ago to 35 cents a pound now. The increase is needed to cover higher fuel and fertilizer costs, as well to provide profits for growers.

But cane sugar producers haven’t fared as well, Roney said. In August, the U.S. Department of Agriculture chose to let in another 300,000 tons of foreign sugar before the new farm law went into effect on Oct. 1. It believed there was a supply shortage.

That sugar was supposed to enter the country as refined beet sugar, he said. But customs had trouble determining how to limit it to refined sugar, so it entered as raw cane sugar. But it turned out there was no supply shortage. And cane sugar prices have crashed.

The price for cane sugar a year ago was 22 cents a pound. Now it’s just 19.5 cents a pound, Roney said.

“That just pounded the price at the worst possible time,” he added.

But hopes are that the new farm law will prevent these sudden, unneeded supply additions in coming years.

“It really gives our growers a chance to survive,” Roney said.

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