| NEW YORK (Dow Jones)--Uncertainty about the state of the
refining sector and about government policy has led U.S.
farmers to scale back plans for planting sugar beets this
year, analysts say.
Several refiners have gone out of business, making it
harder for farmers to sell their beets, while the government
isn't expected to bale out growers like it did last year by
keeping stockpiled sugar from defaulted loans off the market.
Sugar farmers in the western U.S. have also been hit by the
energy crisis there.
U.S. farmers are expected to plant 1.432 million acres in
12 states with sugar beets in 2001, 8% below the previous
year, the U.S. Department of Agriculture said Friday in its
annual "Prospective Plantings" report.
A USDA official declined to comment on the reasons why
plantings are down, saying only the data "isn't certainly
bearish."
A trader with a large U.S. brokerage firm said the drop in
acreage planted may have to do more "with the
uncertainties surrounding the market," than farmers' real
desire to see their crops reduced.
He noted that with ownership of several refining facilities
up in the air, growers don't know whether they'll have a place
to process their beets at the end of harvesting.
U.K.-based sugar and starch producer, Tate & Lyle PLC (U.TAT)
is in the middle of negotiations to sell its Nebraska-based
Western Sugar. Co. to a growers' cooperative.
On Monday, Tate & Lyle announced that the sale, which
was expected to close March 31, has been delayed to June 30
because the growers haven't been able to secure financing to
pay the $78 million for six refining facilities - two in
Colorado, two in Nebraska, one in Wyoming and one in Montana.
The company said conversations will continue and, like the
growers, it expects the sale to close on target.
Uncertainty Over What Govt. Will Do With Stockpile
Ed Makin, executive vice president at C. Czarnikow Sugar
Ltd. in New York, said that uncertainty about what the USDA
will do with its 793,000 tons of sugar stocks might have
played a role in the acreage drop. The government has drawn
criticism for its sugar stockpiling and may not be willing to
do the same this year, deterring farmers from planting beets.
Yet Makin added that the fall in planting intentions could
lend support to prices, and he said "I think this is the
first positive news the domestic sugar market has seen in
years."
Domestic refined sugar prices are recovering from recent
20-year lows. Most refined sugar in the U.S. comes from beets.
The most significant drop in beet planting intentions was
in California, down 56% from the previous year, after the
closure of two sugar factories there last year by the largest
U.S. sugar refiner, Imperial Sugar Co. (IPRL).
Imperial filed for Chapter 11 Bankruptcy Protection earlier
this year. The company is also trying to sell another facility
in Michigan, which has contributed to the anxiety among
growers, said market watchers.
Ben Goodwin, executive manager of the California Beet
Growers Association, told Dow Jones Newswires he doesn't
expect the downward trend in plantings to continue there in
coming years because growers are hopeful that Imperial Sugar's
current restructuring efforts will be successful and that it
won't be forced to shut its two remaining factories in the
state.
He also cautioned that given the depressed domestic price
for cotton, which is nearly at a 15-year low and is produced
widely in the state, farmers are likely to keep planting
beets, which although not a great alternative, are "a lot
better than the cotton" option.
In Oregon, where the ongoing West Coast energy crisis has
hit many companies, planting intentions were down 32% versus
the previous year, trailed by Ohio where plantings are seen
17% lower than a year earlier.
Luther Markwart, chairman of the American Sugar Alliance,
an umbrella group that represents sugar cane and beet growers,
said West Coast plantings could come down even further.
He explained that utilities in Oregon, Washington State and
Idaho are trying to buy power from irrigators to resell it to
California utilities, which could curtail plantings.
The USDA estimates U.S. sugar production will total 8.54
million short tons in 2000-01, below the estimate of 9.042
million for 1999-00. Of that, beet sugar output is seen at
4.37 million short tons, down from 4.976 million tons in
1999-00. |