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Sugar woes bring sweet boost to Idaho beet farmers

By: | at 07:00 PM | Channel(s): International Trade  

Hurricane damage to Southern sugar cane, fewer nationwide acres planted to sugar beets, and a poor beet harvest in the Midwest means Idaho sugar beet producers stand to reap higher prices for their crop, industry experts said.

With the harvest just two weeks short from completion, Amalgamated Sugar Co., a farmer-owned cooperative in Boise, expects to process roughly five million tons of sugar beets at its three plants. That will yield around 800,000 tons of sugar and about 10% of domestic sugar production.

“Idaho’s harvest is a significant part of the market but more so this year,” said Mark Duffin, executive director of the Idaho Sugar Beet Growers Association.

Good news for Idaho’s sugar beet industry comes at a time when wholesale sugar prices—the price paid by bulk sugar buyers such as candy companies—have risen to as much as 41 cents per lb. in recent weeks from 24 cents a lb. in 2004.

Industry analysts are forecasting price spikes in coming months as well as a tightening in a government-controled market that already has experienced some shortages compared to pre-hurricane projections. They predict Idaho sugar beet growers will realize a higher-than-expected net return on the sugar they bring to the market.

“We haven’t seen prices like that since the 1970s,” Craig Ruffolo, vice president of McKeany-Flavell, a commodities research firm in Oakland, California, said of wholesale costs. “We have a very tight sugar market on our hands right now.”

Those predictions are leaving a sour taste with American candy manufacturers, however.

“There will be some concern until supplies are back to normal and we don’t know how long that will be,” said Susan Smith, spokeswoman for the National Confectioners Association, a trade group.

Bill Kelley, vice chairman of Jelly Belly Candy Co. in Fairfield, California, said rising prices—with the cost of sugar on the spot market increasing by up to 20%—already are pinching candy manufacturers. The gourmet jelly bean company has had some difficulty obtaining certain kinds of sugar and sugar in the size bags it prefers, Kelley said.

The US sugar market has long been carefully controlled by the federal Agriculture Department to ensure an adequate supply and stable prices.

After hurricanes ravaged Florida and Louisiana, the nation’s top cane sugar states, the USDA loosened restrictions on imports. It allowed domestic producers to bring their stored stocks, about 500 million tons of sugar, to market.

Sugar producers are reporting an all-time low in inventories, with Amalgamated Sugar Co. in Idaho predicting it will be able to sell its stored sugar within one year rather than the five years it had previously projected.

“Things will be turned around much quicker than expected and, certainly, it helps,” said David Budge, vice president of Amalgamated.

Idaho is the second-largest sugar beet producer in the nation after Minnesota. Sugar beets are a major crop in Idaho, generating more than $800 million a year in economic activity.

Sugar beets account for more than half of domestic sugar production, with sugar cane representing about 46%. The USDA last month trimmed its estimate of US 2005/06 sugar production to 7.87 million tons and raised its estimate of imports to 2.07 million tons.

The United States is the fourth-largest sugar producer in the world and, as its largest consumer, a net importer. Sugar prices have also been affected by expectations that Brazil, the world’s biggest producer, will divert a larger amount of its crop into ethanol fuel due to high crude oil prices. (Reuters)