“Imports are down, sugar supplies down, but the ending stocks we have this year carrying over into next year really illustrate how tight our market is going to be because the stocks-to-use ratio is really tight."
The United States Department of Agriculture is expecting sugar beet production to be reduced about four percent and sugarcane about three percent from 2017-18 levels for the 2018-19 crop years, said LSU AgCenter economist Michael Deliberto.
Deliberto made his comments at the sugarcane conference of the 96th Annual Convention of the Louisiana Farm Bureau Federation.
“If you had to put a one or two sentence summation on the sugar market this year going into next, it would be tighter supplies,” Deliberto said. “Imports are down, sugar supplies down, but the ending stocks we have this year carrying over into next year really illustrate how tight our market is going to be because the stocks-to-use ratio is really tight."
Deliberto said imports from Mexico are expected to be up in 2018-19 but are subject to the U.S. needs report from the Department of Commerce that is due next month.
“That will be something interesting to watch,” Deliberto said. “When you look at the long term on prices, the market fundamental for beet and refined cane sugar are starting to return to levels that we saw prior to 2014. One thing that influenced the price was the finalization of the suspension agreement of the trade case against Mexico.”
Deliberto ultimately said the tighter supply environment should create a favorable market for Louisiana sugarcane farmers for next year.
Deliberto also commented on the world sugar market. In reviewing world market trends that affect prices, he said Brazil diverted a large portion of its crop into ethanol production in 2009 which pushed prices upward for a few years, but world sugar prices are currently on a downward trend.
“Global sugar production for 2018-19 is lowered but there still remains at a large surplus,” Deliberto said. “Therefore, the opportunity for expanded global sugar trade will be difficult because world sugar prices have been trending down since 2016.”
Deliberto said the world futures sugar market only accounts for 25 percent of the total amount of sugar produced globally as countries use their production to supply their own domestic markets. Major exporting countries like Brazil, India and Thailand see these markets as an outlet to reduce burdensome domestic supplies. Although Brazil’s sugar production is reduced as they divert some of their cane crop into ethanol, competitive ethanol market prices provide a profitable alternative for their sugar industry thus reducing their sugar exports to the world market by 15 percent.
Thailand has increased sugarcane area in recent years, but due to reduced industrial demand for sugar, its excess production, which was created by a sugar tax on beverages, will cause their increased production to enter the world market.
Louisiana’s sugarcane production, along with the other United States cane and sugar beet producers, do not compete on the world market as all its production is consumed domestically.
Another speaker to address the sugar conference was David Thompson, a sugar beet producer and board member of the Red River Valley Sugar Beet Growers Association of Grand Fork, Minnesota. Thompson described sugar beet farming in a picture presentation to the gathered sugarcane producers.
Thompson said he is a fourth-generation farmer and third-generation sugar beet grower. His 2,200-acre farm is about 80 miles south of the Canadian border.
Although he rotates his sugar beet crop with wheat, soybeans and potatoes, sugar beets are the “backbone of his operation.”
Sugar beets are dug from the ground and stockpiled on an outdoor ventilation system that sucks hot air from the pile. When ambient temperature drops to freezing, the fans are reversed, and cold air drawn in and circulated into the pile to keep the beets chilled until they are ready to be processed.
Unlike Louisiana’s sugar mills which produce raw sugar, sugar beet factories’ end product is refined sugar, Thompson said.