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The federal government plays a huge role in how the
sugar program works and doesn't.
Last fall, the U.S. Department of Agriculture was
criticized for delaying announcing the year's import quotas and was blamed
for depressing prices by causing uncertainty in the market.
Since then, USDA has been applying a series of
bandages to a hemorrhaging industry:
In March, the government announced it would buy up to
150,000 tons of sugar to save $6 million in "administrative
costs" the government would incur in loan forfeitures.
The industry lobbied for a 370,000-ton purchase and
called the government's action inadequate to improve prices so that
forfeitures wouldn't be necessary. USDA bought only 132,000 tons of sugar
for $54.1 million.
In July, the government announced a
"payment-in-kind" program. They would give farmers "PIK"
certificates in exchange for destroying some healthy beet acres to keep
the surplus pile under control. As of last week, about 104,000 acres were
reported to have been accepted into the program, of which about 35,000
acres are from the Red River Valley.
Sept. 15, the USDA allowed sugar companies to forfeit
sugar collateral to pay off government loans, something that wasn't
supposed to happen if more than 1.5 million tons of sugar is imported.
Allowing the companies to pay back loans with sugar, not money, cost
taxpayers an estimated $100 million, critics say.
In the announcement, the government set Mexico's
"entitlement" at 106,000 tons of refined sugar for the year.
That's less than Mexico thought it was entitled to, and it's unclear
whether the country will be allowed to export that amount into the United
States until the sugar dispute is settled, according to industry analysts.
'Rationalization'
How many weeks
can the sugar industry take like the past two?
Plant closings
are called "rationalization" in the business world.
In the past
week, the Amfac/JMB company announced it would shut down sugar plantations
on Kaua'i in mid-November, eliminating 400 jobs -- half of the ag jobs on
the Hawaiian island.
Gay &
Robinson's Olokele Plantation is the sole survivor of what once were nine
sugar companies on the island.
Two days
earlier, on the island of Maui, Hawaiian Commercial and Sugar Co., shut
down a mill, blaming poor prices and an extended drought. The closing cuts
75 jobs leaves Alexander and Baldwin's Puunene Mill as the sole
survivor.
Sept. 8, U.S.
Sugar Corp., cut 217 full-time and 110 seasonal workers in a
"top-to-bottom shake-up" to save $20 million. The company
employs 3,500 workers in Clewiston, Fla. Clewiston has 6,500 residents and
an unemployment rate of 20 percent. U.S. Sugar is a partner with American
Crystal Sugar Co., Minn-Dak Farmers Cooperative and Southern Minnesota
Beet Sugar Cooperative of Renville, Minn.
Imperial Holly
closed two beet refineries in northern California, serving 250 growers and
providing 400 full-time factory jobs. The former Spreckles mills will
reduce 275,000 tons of refined beet sugar.
Faced with an
uncertain future, Rocky Mountain Sugar Growers, a four-state sugar
cooperative formed in July to try to study whether to make an offer on six
Western Sugar Co. factories they supply with beets. The plants employ 650
full-time and 980 seasonal people.
Western, owned
by Tate and Lyle, officials told growers they're "re-evaluating their
options" and are entertaining purchase offers. Nearly 1,100 growers
in Colorado, Nebraska, Wyoming and Montana are considering buying the
plants.
Unclear is how
they'll fund a purchase the plants in a time of low profits in sugar and
an uncertain future. The plants were built in the early 1900s run about
half the capacity that plants do in the Red River Valley. |