Sugarbeets: Better markets predicted
Sugarbeets: Better markets predicted
According to CoBank Knowledge Exchange Division Manager Tanner Ehmke, U.S. sugar producers could expect “sweeter times ahead” moving into the 2020-21 marketing sea- son.
Ehmke noted the severe crop production losses for the 2019-20 marketing year inflicted significant financial stress on many U.S. sugarbeet growers and processors.
“Many U.S. sugarbeet growers financed their spring crop planting with crop insurance indemnity payments and financial aid from USDA while processors struggled with less throughput and lower extraction rates amid high fixed costs,” Ehmke explains.
He continues, “The smaller Mexican cane sugar crop and capacity constraints to convert raw sugar to refined sugar in the U.S. will continue supporting U.S. sugar prices heading into this fall’s sugarbeet harvest, which should allow U.S. processors to market their expected record crop at lofty prices.”
He notes COVID-19 has had minimal impact on total U.S. sugar demand, but processors will be watching retail and food service sales closely in the months ahead as state and local economies reopen.
“Assuming normal harvest weather returns this fall, U.S. sugarbeet growers and cooperatives are expected to have a stronger year financially for the 2020-21 crop,” according to Ehmke. “Improved production and high prices offer a much-needed recovery from the stressful 2019- 20 growing season.”
Stressors and production
“The U.S. sugarbeet industry has experienced multiple financial stressors from production losses in some regions of the U.S. stemming from reduced sugarbeet harvested acre- age, lower quality sugarbeets and an abbreviated processing season that has hurt both growers and the cooperatives that process the sugarbeets into refined sugar,” Ehmke explains.
He continues, “Some processors had to declare force majeure on contracted sugar in affected areas as a result of the significant loss in sugarbeet production. Although refined sugar prices have rallied, the 2019-20 sugarbeet harvest had been previously marketed at much lower prices.”
“The steep loss in production hurt both processors and growers, with USDA stepping in to provide $285 million in financial aid to U.S. sugarbeet growers in April 2020 in time for planting of the 2020-21 sugarbeet crop,” he says. “This financial support helped stressed growers cover planting costs.”
According to Ehmke, the 2019 harvest of sugarbeets was the fifth biggest year-over-year decline on record with a decline of 14 percent, with some prominent sugarbeet-producing states falling more than 20 percent. In addition, abandonment levels were the highest since the Great Depression, with 13.5 percent of fields left unharvested and yields reached a five-year low.
To support U.S. sugarbeet growers heading into the 2020-21 growing season, USDA delivered $285 million in relief payments to sugarbeet growers via sugarbeet cooperatives across the country through Wildfire and Hurricane Indemnity Program- Plus (WHIP+) in March and April, playing an integral role in helping farmers finance the planting of the 2020-21 crop sugarbeet crop.
“Processors were also negatively impacted by the steep drop in sugarbeet production. Some processors declared force majeure on contracts with buyers due to the crop losses,” Ehmke says. “And because sugarbeet processing plants also have high fixed costs and can only process sugarbeets, processors in areas with big crop losses suffered significant financial losses.”
He continues, “Lower sugarbeet quality also impacted processors’ profitability. Hard freezes and early frosts last year hindered sugar accumulation in beets with the nation-wide average sugar extraction rate from slice falling to 14.3 percent this year –
the lowest since the 2016-17 crop.”
“However, with fewer beets to process, processors were able to make up for lower-beet quality by slowing the processing pace to push extraction rates higher,” says Ehmke.
Outlook
Ehmke notes growers and processors are expected to see better than normal conditions in 2020-21 following this year’s stressful year wrought with extreme weather and market uncertainty.
“While wet field conditions again disrupt spring planting efforts for sugar- beet growers, total acreage planted is expected to increase year over year and drive total production higher despite the expectations of lower yields caused by later planting,” he says.
“USDA’s Prospective Plantings report forecasts U.S. sugarbeet acreage at 1,138,500 acres for 2020, up slightly year over year by 6,500 acres,” he says. “Total acreage, though, will likely be revised upward with farmers expected to make up for lower yields to fulfill their shares of contracted beet production with processors.”
He continues, “USDA currently is predicting the 2020-21 sugarbeet crop currently being planted to be 18 percent larger year over year at 33.7 million short tons – assuming a return to normal harvest weather this fall.”
“With processors contracting an expected large crop in today’s strong price environment, cooperatives are expected to be in a much-improved financial position, enabling them to make debt payments, reinvest proceeds to make plant upgrades, and disburse more to co-op members,” he concludes. Callie Hanson is the managing editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.
