| FARGO -- Sugar beet farmers should see sugar prices slowly
rise over the next decade as the market recovers from the current glut
that caused its fall, a North Dakota State University study shows.
But higher prices may not mean more money in the pockets of sugar
producers, who also will see production costs rise, said Won Koo, director
of the Center for Agricultural Policy and Trade Studies at NDSU.
"So unless a farmer tried to make their sugar beet production more
efficient, there may be some reduction in net farm income, even though
sugar prices recover," Koo said.
Wholesale U.S. sugar prices should bottom out at 21.7 cents per pound
this year and rise to 24.2 cents per pound in 2005 and 26.6 cents per
pound in 2010, Koo wrote in the study.
Refined sugar fetched 26.7 cents per pound in 1999, before oversupply
forced prices down.
Stephen, Minn., sugar-beet grower Craig Halfmann said farmers are
working efficiently now and could only make slight additional cost
savings. He thinks the price increases will be eaten up by increasing
costs.
"It's a real price squeeze for a farmer today, because when you're
caught in a flat market with escalating costs, how do you make a
profit?" said Halfmann, who serves as president of the Red River
Valley Sugarbeet Growers Association. "That's the real enemy,
inflation."
Red River Valley sugar beet growers are in the midst of harvest.
Halfmann said shareholders of Moorhead-based American Crystal Sugar Co.
should learn the amount of their final 2000 crop payments this fall, with
the outcome of the current crop to be announced later.
American Crystal and Minn-Dak Farmers Cooperative are both owned by
valley farmers and process and market sugar.
PIK program
Together, the companies will see more than 38,000 acres of beets
destroyed through the federal Payment In Kind Diversion Program, which
compensates producers for not processing sugar in an attempt to reduce
supply.
Koo said the program is helping raise prices. Market forces also will
be at play over the decade, when Koo predicts increased demand for sugar.
The study was conducted before the Sept. 11 attacks on the World Trade
Center and the Pentagon and does not take into account their effect on the
global economy. Slowed economic growth could mean slower growth in demand
than predicted, Koo said.
Total U.S. sugar production grew 45 percent from 1985 to 2000, with
beet sugar production rising at more than twice the rate of cane sugar
production. Beets are processed directly into refined sugar, while
sugarcane is milled into raw sugar -- which itself is sold -- before being
refined.
Consumption also increased over the period and outstripped domestic
production, with the difference covered by imports. |