Predicted global sugar supply deficit might not affect sugar beet prices

(AgWeek) – The possibility of stronger down-the-line sugar prices sounds good, but it’s too early to take higher prices for granted, Red River Valley sugar beet officials say.

“Whether we see any improvement or not, remains to be seen. When there’s production problems in one area, another region of the world seems to step up” (and produce more), says Paul Rutherford, a Euclid, Minn., farmer and president of the Red River Valley Sugarbeet Growers Association.

The Red River Valley of eastern North Dakota and western Minnesota is the nation’s leading sugar beet producing area. At current sugar prices, which stand at their lowest levels since the 1980s, Red River Valley beet growers will struggle just to break even this year, producers say.

But relief might be coming, according to a recent article by Reuters.

The world sugar market, which has had three straight years of big surpluses, might be headed to a small deficit in several years. That should bolster world sugar prices, although the process won’t happen overnight, according to the article.

The article found that world sugar demand is rising 2.2 to 2.5 percent annually, with China and other Asian countries accounting for much of the economy.

“The world’s economy is getting stronger, and consumers like to use a little more sugar,” William Hejl, an Amenia, N.D., sugar beet farmer and a past president of the World Association of Beet and Sugarcane Growers,” tells Agweek.

The Reuters article also points to production problems worldwide. A long drought in Brazil, the world’s leading sugar producer and exporter, has hampered sugar cane planting. And the prospects for a bad monsoon season in India, the world’s number two sugar producer, has cut into planted acreage.

Sugar prices have rallied recently, apparently at least partly in response to the factors cited by Reuters. Raw sugar futures stood recently at 18.28 cents per pound, up from a low of 14.7 cents early this year. Even so, the current price is only half of what it was in early 2011.Prices of sugar, like those for other agricultural commodities, are cyclical, says Nick Sinner, executive director of the Red River Valley Sugarbeet Growers Association.

“We don’t wish ill on any part of the production world. But the fact is, production goes up and down. That will affect our prices here,” he says.

“It’s a tough time for the growers right now. But we’re hoping that consumption will continue to increase and we can get back to some reasonable prices for the sugar we’re producing,” he says.

The Reuters article doesn’t mention the formal complaint by U.S. sugar producers that they’ve been hurt by subsidized sugar imports from Mexico. The U.S. International Trade Commission recently issued a preliminary ruling in favor of the U.S. producers’ position.

U.S. sugar growers maintain that unfair Mexican exports have contributed to low U.S. sugar prices.

The late, wet spring, which has delayed planting in much of the Red River Valley, hurts the outlook for yields, Rutherford says.

Valley beet farmers will need better-than-average yields to break even, given current prices, he and others say.

Late-planted sugar beets generally don’t yield as well as beets planted on schedule.