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FARGO
-- In a first for the nation's sugar industry, some 35,000 acres of
American Crystal Co. sugar beets will be destroyed this fall in a
government effort to reduce sugar supplies and raise prices.
The
35,000 Red River Valley acres account for about one-third of the nearly
105,000 acres that will be acquired and destroyed nationwide as part of
the federal Payment-In-Kind program, officials confirmed Friday.
U.S.
Department of Agriculture letters to growers, telling them their bids had
been accepted, were mailed Wednesday from Kansas City, Mo., according to
Scott Stofferahn, North Dakota state director of the U.S. Department of
Agriculture's Farm Service Agency.
"The
amount of (Commodity Credit Corporation)-owned sugar will exceed the
number of bids accepted," Stofferahn said Friday. "All that met
eligibility criteria and were fully processed will be
accepted."
The
PIK program is designed to take commodities off the market to reduce
stocks and improve prices for farmers.
In
the case with sugar this year, the government will pay farmers -- in PIK
certificates -- to destroy healthy beets that otherwise would be processed
into sugar. A PIK certificate is issued to represent a set quantity of
stored sugar. The certificate later is converted to cash.
The
PIK program was announced for sugar this year after the government
determined that tens of thousands of acres of sugar beets that were being
used as collateral for government loans likely would be forfeited to the
government.
The
situation arose when market prices fell below the commodity loan rates the
processors had taken out with the government. Therefore, it's cheaper to
forfeit the sugar to the government than pay off the loans.
Agriculture
Department sources in Washington on Friday confirmed industry reports that
about 104,000 to 105,000 acres had been submitted for destruction,
nationwide. Earlier, American Crystal officials indicated about 35,000
acres had been submitted in the program in the cooperative, out of about
500,000 acres of production.
Crystal
officials initially indicated up to 50,000 acres might be destroyed with
the program, but those figures were tempered by eligibility rules.
Payment
limit
Among
the rules are a $20,000 payment limit, the rules that exclude certain
business arrangements (chiefly limited partnerships) and rules that
prohibit inclusion for acres that received even minor crop insurance
payments.
There
are indications the program took out of production the low side of USDA
expectations, meaning the program might give a lift to sugar prices, which
was the reason for the paid diversion.
In
late August, the Federal Register indicated the government expected the
program might displace 300,000 to 400,000 tons of sugar.
At
104,000 acres diverted, with average expected production of 2.9 tons of
sugar per acre, that means about 300,000 tons of refined sugar
displaced.
That's
doesn't come close to eliminating the sugar pile owned by USDA. Already
200,000 to 300,000 tons of sugar have been forfeited to the government and
another 940,000 to 950,000 tons are under loan, and a significant amount
of that is expected to be forfeited, USDA sources indicate.
Lynn
Tjeerdsma, FSA's branch chief for emergency preparedness and programs,
said numbers of acres accepted will not be broken down immediately by
state. |