Sugar market stable and upbeat, economist says

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FARGO – Sugar beet growers can expect a positive sugar price until at least 2023. And there are positive signs beyond that.

That’s the optimistic message from Jack Roney, senior director of economics and policy analysis for the American Sugar Alliance, which represents both the beet and cane industries – producers, processors and refiners. .

Roney, with the ASA since 1996, was the key guest speaker Thursday, December 3, at a joint “virtual” meeting between the American Crystal Sugar Co. of Moorhead, Minn., And the Red River Valley Sugarbeet Growers Association, based in Fargo and representing the members of the co-ops. Annual Sugar Meetings serve as annual business meetings, but in 2019 attracted some 800 farmer shareholders and interested parties.

As always, much of the co-op news for this year’s annual meeting came out at the Factory District meetings in November, led by a payment projection of $ 52 per tonne for the 2020 crop – the upfront payment projection. the highest for many years. The cooperative also announced a “comprehensive active farmer policy” which will keep the cooperative in line with the roots of the cooperative.

Roney said a key determinant of refined sugar prices is the inventory-to-use ratio – that is, excess inventory at the end of the marketing year in September.

A lower inventory-to-use ratio usually means higher prices. Ending stock-to-use ratios, on average, declined from an average of 16.2% in MY 1996-97 to 14.7% in MY 2016-17. This is in part due to increasingly effective trade agreements with Mexico.

US sugar policy is designed to allow imports, but not to disrupt a domestic industry that provides $ 20 billion in economic activity and 142,000 jobs.

Roney has been at the forefront of the sugar industry. He worked at the USDA from 1975 to late 1989 as chairman of the Interagency Committee on Sugar Estimates, working for the World Agricultural Outlook Board, which publishes the World Agricultural Supply and Demand Estimates, or WASDE. Roney worked for several years as the vice president and Washington representative of the Hawaiian Sugar Planters Association, and eventually joined the ASA in August 1996.

Roney said a key trade issue was with the North American Free Trade Agreement, adopted in 1994. NAFTA limited Mexico’s access to the US sugar market for the first 15 years, with maximum quantities. fixes they could send, other than years of hurricane disruption.

Initially, Mexican shipments to the United States remained well below 1 million metric tonnes. But in 2008, NAFTA established a full “free trade” between the US and Mexican sugar markets.

The wholesale prices of refined beet sugar around the world soared from 2009 to 2012. In 2013, Mexico had a huge harvest and for two years sent over 2.1 million short tons of sugar to the United States. , roughly twice as much sugar as the US market “needed.” “said Roney.

The prices have collapsed.

The United States took cases to the ITC, resulting in anti-dumping and countervailing duties of 80% of the import price. These were said to have been in place until 2014, when the two governments negotiated “suspension agreements” intended to limit refined sugar from Mexico.

But the deals weren’t enough, and in 2017 the Trump administration changed those deals. Since then, US inventory-to-use ratios have returned to the USDA target range of 13.5% to 15.5%. (In fact, the 2019-20 stocks-to-use ratios have declined to 13% and the 2020-21 ratio is projected at 10.6%, but will be corrected in December.)

The amended agreements provided for “benchmark prices,” below which Mexico cannot sell in the US market, Roney said.

“They increased our floor price. And they provide some “inoculation”, if you will, against future free trade agreements, because if the U.S. government does more deals with foreign countries to give them more access to the U.S. market, it will flow from Mexico’s access to our market, rather than to the United States (farmers), ”he said.

Sugar prices rose earlier this year to around 44 cents per pound in cash, but fell to around 36 cents per pound. American Crystal Sugar and other co-ops in the region did not have much sugar to sell in this market in 2020 due to the 2019 harvest disaster after an untimely frost and snow conditions in the Upper Midwest and a bad Louisiana cane sugar crop.

“Imports have stabilized the market,” Roney said. The price for the marketing year is projected at 36.50 cents per pound – well above the benchmark price for imports from Mexico, and well above the loan forfeiture range of 26 cents to 28 cents for 2020-2021.

“We have every reason to expect prices to hold at these kinds of levels going forward, which should give our growers an opportunity to survive,” said Roney. “We finally have some peace and some certainty for the future, in our relations with Mexico.”

Beyond international trade policy, the 2018 Farm Bill defined U.S. domestic and sugar policies until 2023.

Rep. Collin Peterson, D-Minn., A rank Democrat on the United States House Agriculture Committee, meets with farmers and media at Moorhead Municipal Airport, Minn. On December 3, 2018 , to talk about the apparent passage of the new agricultural bill. Mikkel Pates / Forum News Service

Roney praised the outgoing Chairman of the House Agriculture Committee, Collin Peterson, D-Minn., Who he said was most responsible for including sugar policies in the 2008 farm bill. He hailed Peterson as “the greatest sugar policy advocate we have had in decades.” Roney also noted the departure of Rep. Mike Conaway, R-Texas, the committee’s most senior Republican, also a “big champion” of sugar.

Democrats on Thursday voted U.S. Representative David Scott, D-Ga., For president. Peterson had previously approved Scott for the job.

Without these leaders, Roney said future farm bills would be a “challenge” now, with high turnover in Congress. Sweetener users – primarily candy makers, who are among the sugar industry’s biggest customers – constantly attack sugar programs that provide a safety net for the domestic industry, in hopes of lowering prices. sugar.

Roney said the industry must be vigilant to ensure that any trade deal the Biden administration concludes with the UK, Japan or Kenya ensures that any concessions should come from Mexican imports into the US, and not from American producers.

In areas of demand, Roney said U.S. food consumption has increased 20 percent more calories per day than it was a couple decades ago, but the share of sweeteners is declining. Roney said.

Total consumption of sweeteners has fallen by about 20% since 2000, he said, even as obesity levels have increased. The consumption of high fructose corn sweeteners increased until about 2007, but decreased. Sugar consumption has largely stabilized, but has declined over the past two years.

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