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The government may soon reimburse the Red River Valley's sugar
beet farmers to plow under some of this year's crop.
The U.S. Department of Agriculture is considering a
payment-in-kind program to help shore up the nation's faltering
sugar industry and ease the threat of massive loan forfeitures.
Under the program, sugar beet and cane farmers would pledge to
destroy a portion of this year's crop. In return, the U.S.
Department of Agriculture would issue certificates for
government-owned sugar that farmers could exchange for cash.
In the Red River Valley, American Crystal Sugar and Minn-Dak
Farmers Cooperative would pay their farmer members cash for the
certificates. The cooperatives would then turn the certificates in
to the government and take ownership of surplus sugar.
Jim Horvath, president and chief executive officer of American
Crystal Sugar in Moorhead, testified before the Senate Agriculture
Committee Wednesday and asked that a payment-in-kind program be
implemented.
The Agriculture Department is "strongly considering"
the proposal, but no details have been worked out, said Parks
Shakelford, associate administrator for programs in the department's
Farm Service Agency.
By law, farmers could not collect more than $20,000 in the
program.
A payment-in-kind program could be implemented by Agriculture
Secretary Dan Glickman without congressional action, said Sen. Kent
Conrad of North Dakota, a senior Democrat on the Senate Agriculture
Committee.
Still, that committee debated the proposal Wednesday. Committee
chairman Sen. Richard Lugar, R-Ind, opposed the idea, Conrad said.
The proposal could be a huge boost to the valley's beet growers.
Sugar beet production adds about $2 billion annually to the
region's economy, Conrad said.
"I guess this is just about the best idea I've heard so
far," said Bill Hejl, a sugar beet farmer who lives near Amenia,
N.D.
"It gives us a little breathing room while they work on what
we need to do in the long term," he said.
With sugar prices at an 18-year-low, growers are threatening to
forfeit up to $500 million in government loans for which the natural
sweetener was used as collateral.
American Crystal has 201,000 tons of sugar on loan and Minn-Dak
received federal loans on 18,000 tons.
Growing domestic production and increased imports have driven the
per-pound price of refined sugar down to about 2 cents below the
loan rate.
In June, the government bought 132,000 tons of surplus sugar, but
the purchase did not faze low market prices.
A payment-in-kind program is the best way to eliminate surplus
sugar, protect the government from costly forfeitures and help raise
the price, said Mark Weber, executive director of the Red River
Valley Sugarbeet Growers Association.
Taking ownership of forfeited sugar would cost the government
more, Weber said.
"Forfeitures are just around the corner if something doesn't
happen," Weber said. "It's something that we think can
work and is a very good short-term solution."
Storage costs alone would cost the government "tens of
millions of dollars", Conrad said.
"I strongly support this approach," Conrad said of the
payment-in-kind proposal.
"I think what we were working on today would go a long way
toward coping with the crises that currently exists."
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