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There is too much sugar on the domestic market. The oversupply
is pushing prices down and raising concerns of sugar forfeitures.
In an attempt to avoid large forfeitures the government might
purchase some sugar, Luther Markwart, Executive Vice-President of
the American Sugarbeet Growers Association said. “It would be a
way of getting ahead of the problem.”
There is presently 300,000 to 400,000 tons too much sugar in
the market place. Prices have dropped about 25 percent over the
last year. There are two options available. One is a government
purchase of sugar. The second is for companies who have sugar
pledged as collateral on federal marketing loans to forfeit that
sugar. A government purchase could cost about $1 million. The
second option is forfeitures which could cost the government as
much as $565 million, or more.
If the government purchases sugar, they “would not be doing
anything they haven’t done for other commodities,” Markwart
said. After purchasing the sugar the government could donate the
sugar as food aid, or sell it to use for the production of
ethanol, which could help eliminate some of the present oversupply
of sugar.
At this point, Markwart said, the amount of sugar the
government might purchase is unknown, as is whether or not they
will buy sugar. Even if the government purchases sugar it will
most likely not be enough to offset the possibility of
forfeitures, according to Owen Palm, Vice President of the North
American Sugarbeet Operations for Tate & Lyle. Putting sugar
under loan is intended to work as a safety net for sugar producers
putting a floor on sugar prices. As of March 24 there was
1,394,000 tons of sugar under loan at a cost of $565
million.
Companies can still put sugar under loan. At present, neither
Holly Sugar or Western Sugar Company have sugar under loan.
However, Palm said, “we (Western Sugar) are strongly considering
it.” Loans will be due in July, August, and September, Markwart
said. Once a loan has been taken out, “should we decide to
forfeit the sugar,” Palm said, “it will have to benefit both
the company and growers. If it would not benefit the company and
growers, we would not forfeit the sugar.”
Forfeiting sugar would have some benefits, Palm added. It would
‘make the potential of carryover into the 2000 crop dissappear.”
“The biggest negative to forfeiture is that there will be a cost
to taxpayers.” “This will be the first time in 16 years the
sugar policy will cost the government any money,” Wyo-Braska
Beet Growers Association President David Hinman said. “We have
always been very proud to say the sugar program does not cost the
taxpayer any money,” Palm said.
Since 1991 the sugar program has actually contributed “$297
million” to the government through marketing assessments,
Markwart said. This year, “it is going to be a cost program,”
Markwart said. “The challenge is, how can we make it the least
costly.” With a cost to the government, Hinman said, the sugar
policy will come under political fire in Congress. Year-after-year
opponents of the sugar program have attempted to dismantle the
program in Congress. “If sugar is forfeited does that mean the
sugar program has failed?” Palm asked. “The answer is no. It
is a failure of Freedom to Farm.”
Over the last five years there has been an increase of
sugarbeets and sugar cane acres planted. Early indications point
to a modest increase in acres again this year, Palm said. The
reason is the low prices for other commodities make sugar an
attractive alternative. “We have managed to oversupply the
domestic sugar market, that means lower sugar prices,” Colorado
Sugarbeet Growers Association President Joe Amen said.
However, it is much more than just over production.
International treaties, such as GATT, require the U.S. to bring in
sugar from foreign countries. Adding to the mix is 250,000 metric
tons of sugar that will come across the border from Mexico in
October under NAFTA. There is also stuffed molasses, about 125,000
tons, coming across the Canadian border into the domestic market.
“When you add all the required imports to our domestic
production there is just too much sugar in the pipeline,” Amen
said. “It’s not unlike any other commodity.” “The real
solution to the problem (of oversupply) is to improve the price
for competitive crops,” Palm said. “This current situation
underscores the need for having price supports as part of our farm
bill, for sugar as well as feed grains.” Under current
conditions, Markwart said, either a government purchase of sugar
or forfeitures are “unavoidable”.
Only twice in the history of the sugar program has sugar ever
been forfeited, according to Markwart. Once in 1991, 13,000 tons
were forfeited in California. In that case, the government turned
around, sold the sugar on the open market and made money on the
deal. The only other forfeiture of sugar was when GW (Great
Western) went bankrupt in 1984. Half of that sugar was given to
China as food aid and the other half was sold to ethanol plants.
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