Minnesota’s sugar beet growers are suffering their worst financial results in several years as plummeting sugar prices have drastically cut farmers’ income.
At American Crystal Sugar Co., the nation’s largest beet sugar producer, growers are expected to get an estimated $38 per ton for this year’s crop, well below last year’s $68 per ton and $55 to $70 per ton over the past four years, said David Berg, the company’s CEO. “You have to go back several years to find a payment that low.”
A majority of Crystal Sugar’s farmers are losing money this year, Berg said. That’s a relative rarity in an industry that’s largely protected by import quotas — except from Mexico. But a surge in Mexican exports this year is crushing U.S. sugar prices, Berg and others in the industry say.
Minnesota is the nation’s largest sugar beet producing state, and beets are a key part of the Red River Valley economy — on both the Minnesota and North Dakota sides of the river. Crystal Sugar, a cooperative representing about 2,800 growers, alone supplies about 13 percent of the nation’s refined sugar.
Minn-Dak, a Wahpeton, N.D.-based cooperative with members in Minnesota, is also looking at a big payment decline this year. While its budget isn’t finalized, Minn-Dak growers will get payouts around $40 per ton compared with $75 per ton last year, which was higher than average, said Sue Moffet, a company spokeswoman.
The region’s third growers’ group, Renville, Minn.-based Southern Minnesota Sugar Beet Cooperative, didn’t return phone calls Tuesday. But its members’ financial fate isn’t likely to be radically different, given sugar prices.
Wholesale refined sugar beet prices were down 36 percent on average during the recently completed third quarter compared with a year ago, according to the U.S. Department of Agriculture.
“There’s too much sugar on the market,” Berg said. “It’s a tremendously large oversupply, and it’s not going to be sopped up anytime soon.”
The North American Free Trade Act opened U.S. borders to Mexican sweetener exports about five years ago. But the first major impact has been felt over the past year, as Mexico had a big crop and large amount of exports.
Adding to growers’ woes, the sugar content of their beets is down this year — 17.25 percent for American Crystal farmers compared with 19.1 percent a year ago and 18 percent in a more normal year. That one percentage point makes a big difference, Berg said.
Falling sugar prices have also hit U.S. taxpayers this year, likely costing them at least $100 million as the U.S. government has been forced into the sugar market. In addition to import quotas, the sugar industry is supported by what are effectively loan guarantees.
When the price of sugar drops below a certain point, sugar producers can pay off loans to the U.S. government in forfeited sugar, not cash. Last month, Crystal Sugar forfeited 195 million pounds of sugar to pay off almost $47 million in federal loans. Minn-Dak handed over 30 million pounds rather than pay the government $7.2 million.