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MOORHEAD, Minn. -- The region's sugar industry leaders doubt that
Thursday's late night announcement of a 150,000-ton sugar purchase
by the federal government will be enough to avoid sugar loan
forfeitures.
"Does the purchase program go far enough to get the market back
in order?" Jim Horvath, president and chief executive officer
of American Crystal Sugar Co., said Friday. "I would suggest
that, from everything I know, it's not enough to do the trick."
The government will buy 150,000 short tons of sugar, far short of
the 370,000 tons the industry had wanted it to buy.
Horvath said the purchase may have a short-term impact on
published prices, but that the key will be how much sugar is
purchased at those higher prices.
It's a start
The government's move keeps the wheels under the sugar beet
industry, which has a $1 billion annual economic impact in the Red
River Valley. Without action, Crystal officials estimate, that
company's farmers would see a $3- to $7-per-ton beet payment
reduction, which translates to reductions in payments of between $30
million to $70 million.
"I don't know if it'll do much to help our beet payment, but
it's a start," said Jim Hutton, a sugar beet grower from Grand
Forks.
Horvath earlier told grower-stockholders that, if the government
didn't act, to expect prices for year 2000 beets in the $28- to
$32-per-ton range. That's less than the $35.45 for 1999 beets.
Economists at North Dakota State University in Fargo have
calculated the break-even price for sugar beet farmers at about $30
per ton, assuming a healthy 20-ton- per-acre yield.
Mark Weber, executive director of the Red River Valley Sugarbeet
Growers Association, said the price will have to rebound.
"If doesn't come up enough, we're going to have to keep
pushing for the administration to take further action," he
said.
Further action
Ray VanDriessche, a sugar beet farmer from the state of Michigan
and president of the American Sugarbeet Growers Association, said
his group is "certain" the administration will "take
further action, as needed, to avoid costly forfeiture of sugar under
loan."
Weber said that without the government action, the industry is
certain to forfeit huge quantities of sugar valued at $550 million,
with annual storage costs of $30 million.
"The cost of the purchase valued at $577 million is
significantly less than forfeitures and is in the best interests of
taxpayers and growers," Weber said. "The administration
may still need to take further action, as needed."
"We are acting to help address dramatically low sugar
prices," Agriculture Secretary Dan Glickman said. "By
buying U.S. sugar now, we expect to save as much as $6 million in
administrative costs that the government might otherwise incur from
expected loan forfeitures later this summer."
Paul Mathiason, vice president of the American Sugarbeet Growers
Association, says that while the purchase is welcome, its impact on
prices is not yet evident.
"Certainly, we're thankful for whatever they buy, but it's a
good question about how much good it does," he said. "The
amount is the big question -- if it'll do what they thought it'd
do."
Trade issues
There still are trade issues growers say cut into their ability
to thrive, according to Mathiason.
"There's a couple of things the government has been doing
that contribute," he said. "We feel the government has
somewhat of a responsibility to growers."
The Red River Valley area had been preparing itself for
forfeitures. Crystal had 4.5 million hundredweight of sugar under
loan. That's a combination of 100-pound bags, 25-hundredweight
totes, and bulk sugar.
The Moorhead-based co-op accounts for about 15 percent of the
nation's sugar under loan. That's proportional to its 16 percent
share of national sugar production. |