| Sugar industry experts said last week that the U.S. sugar-making
business is in dire straits and needs government help.
At the annual Agricultural Outlook Forum sponsored by the U.S.
Dept. of Agriculture last week near Washington, D. C., leaders of
various segments of the sugar industry bemoaned its status.
"The problems we face are not isolated but industrywide. We
cannot survive by living off of our equity or cannibalizing our
business," said Luther Markwart, executive vice president of
the American Sugarbeet Growers Association and current Chairman of
the American Sugar Alliance, according to a news release by the
Sugar Alliance. "This industry is in serious trouble."
That's true for the local sugar industry, based on historically
low payment levels to Red River Valley sugar beet growers. But the
bad news is also causing financial problems elsewhere.
Latest bankruptcy
Even as the Sugar Alliance was meeting last week, Imperial Sugar
Co. of Texas, one of the largest sugar refineries, announced it
would sell its Diamond Crystal Brands division to Hormel Foods Corp.
for $65 million, in a move to reduce the debt that drove Imperial to
bankruptcy.
That's only the latest in a series of bankruptcies and other
financial crises hitting various elements of the sugar industry.
Thomas McKenna, President of United Sugars Corporation of
Bloomington, Minn., said, "The domestic sugar industry is in a
period of crisis and extreme uncertainty."
The culprit is that government policy "as it relates to the
sugar industry, is not effective," McKenna said.
American Crystal helped found United Sugars Corp., in 1993,
joining with two other beet cooperatives and a Florida cane sugar
company, to answer growing concerns about changing federal farm and
trade policy.
Markwart said that since the 1996 Farm Bill went into effect,
seven sugar beet factories have been closed, Imperial, the largest
sugar refiner is in bankruptcy, and more than half of the sugar beet
factories are for sale to their growers, who are considered
"owners of last resort."
Markwart and others say the main change in recent years is that
USDA's ability to manage sugar production and prices has been
diminished by separate trade agreements made with other nations. It
seems that U.S. leaders are more interested in helping other nations
than their own farmers, say sugar beet farmers.
"We are tied into some foreign trade agreements, like NAFTA,
and other ones, that say so much comes in, and that seems to be
regardless of domestic production," said Ron Reitmeier, a sugar
beet grower from Crookston who is on the board of American Crystal
Sugar Co., the Moorhead-based farmer-owned cooperative.
But more than the trade agreements, it's allegedly illegal
imports that burn beet growers like Reitmeier.
"We have other sugar coming in that is circumventing trade
agreements," he said. Molasses "stuffed," with extra
sugar from low-cost producing nations comes across from Canada to
Michigan where the sugar is extracted and the molasses is shipped
back to Canada to be re-stuffed and re-exported, he said. It adds
enough to U.S. sugar supplies to put lots of downward pressure on
prices, he said.
Solid Crystal
Despite the industry-wide crisis, American Crystal is in solid
financial shape, said spokesperson Jeff Schweitzer on Sunday.
"But yes, we have done the prudent thing and put a lot of
our capital improvement projects on hold, in hopes that prices will
return to more normal levels," Schweitzer said.
That means that the five factories of American Crystal -- in
Moorhead, Crookston, East Grand Forks, Hillsboro, N.D., and Drayton,
N.D. -- could lag behind in repairs and renovations.
PIK-me-up
Markwart says one thing needed is for the federal government to
repeat what it did last year: PIK the crop. That means that farmers
will be subsidized, under the Payment in Kind, or PIK program, for
destroying part of their crop, to get the supply side down in line
with market needs.
About 30,000 acres, or 6 percent of the total of 500,000 acres
seeded to beets last year by American Crystal growers, were not
harvested in return to PIK payments to growers, Schweitzer said.
Markwart also called last week for other measures by the feds:
using more sugar to make ethanol from corn and to stop or moderate
the increasing access to the U.S. consumer market being given to
other sugar-producing nations.
Reitmeier said beet farmers are "cautiously optimistic"
about how friendly the new Bush administration will be towards beet
farmers.
It's a unique breed of farming in the Red River Valley: domestic
production is strictly controlled by farmer-owned cooperatives that
regulate how many acres each member-farmer can plant and when they
are harvested and where the beets are hauled for processing.
Meanwhile, federal laws keep imports of sugar from other nations
to 10 or 15 percent of U.S. consumption.
Somehow it seems that in just one year, what has been a sweet
deal for beet farmers for 25 years has gone sour, said Aime Dufault,
a grower from Argyle, Minn., who just retired from the American
Crystal board of directors.
Beet growers in the Red River Valley will get $31 a ton -- even
less, depending on how the processing season goes -- for last year's
crop.
That's the lowest in 20 years or more, especially in constant
dollars; the per-ton payment ran from $42 to $47 for most years from
1985 to 1994, and makes beet-farming barely a break-even deal,
farmers say.
Other sugar-making countries, especially Mexico, have been given
too much access to the U.S. market, competing with U.S. farmers on
an uneven playing field, Dufault said.
"In this country, our farmers live by environmental laws, we
pay more for (farm) chemicals, for workers," said Dufault.
"We have a lot of higher costs to be farming in this country.
Farmers don't want to get payments from the government, they just
want to get what's fair for their crop." |