Sugar beet growers' outlook is sweet - unless quotas are lifted
Renville County, Minn. — On this damp, windy afternoon, Alex Lamb tramps through one of his fields. ''It's good for growing beets,'' he says of the rich, wet Minnesota earth. ''I think we'll be around 10 years from now. No question about it.''
Confidence abounds here among southwest Minnesota sugar beet growers. Mr. Lamb and many of his fellow sugar beet farmers look forward to a profit this year. Their nearby processing plant already is running full tilt and round-the-clock to turn their beets into sugar and other products.
Underneath the optimism, though, lie some troubling questions. Like steel, autos, and other United States industries, domestic sugar producers face the threat of foreign competition. After next year, their import protections will end. Who will fill America's sugar bowl after that? Presumably, Congress will take up that question when it debates next year's omnibus farm bill.
In 1984, American sugar beet growers are expected to produce the equivalent of 2.85 to 2.9 million tons of raw sugar - roughly a third of America's sugar needs. Another third comes from domestic sugar cane; the rest is imported.
For farmers like Lamb, who are willing to put up with the extra work involved , sugar beets can be good business. Last year, the beets netted one of the highest average returns of any crop - $218 per planted acre after cash expenses and replacement costs, according to the US Department of Agriculture. An acre of wheat, by contrast, produced only $23; soybeans, $70. This year, Lamb figures that only his sugar beets - not his soybeans or corn - will generate any significant profit.
Despite these profits, the US sugar beet industry is undergoing a slow decline. The reason for this is that many processors are being squeezed.
The latest indication came last week: The Great Western Sugar Company barely met a deadline to pay its 2,200 growers in Colorado, Kansas, Nebraska, Wyoming, and Montana. The company, which is a subsidiary of the Hunt brothers' Hunt International Resources Corporation, reportedly had to arrange a loan with a consortium of banks to come up with the cash.
The reported $12 million to $15 million gave growers their final payment for the 1983 crop, according to one source who asked not to be named. The loan apparently will also cover many of the payments for this year's crop, this source added.
The squeeze on beet processors is not particularly new. Economists point out that their numbers have been dwindling for quite some time. In 1976, 56 sugar beet factories were operating. This year there are only 40.
The reason is that contracts between growers and processors have not kept pace with change, says Luigi Angelo, who follows the sweetener industry as an accountant with the US Agriculture Department's Economic Research Service (ERS).
''I think (growers) are getting more than their share of the sugar dollar,'' he says.
Fuel prices, for example, have skyrocketed for the energy-intensive processors. They went up about 1,200 percent during one recent 10-year period, says Roger Hill, senior vice-president of agriculture for Holly Sugar Corporation, based in Colorado Springs, Colo.
To compensate, processors have modernized their plants. Some, like Holly and Great Western, have also tried to negotiate new contracts with growers, many of whom have been reluctant to go along. Last year, Holly's plant in Torrington, Wyo., barely operated at all, since farmers contracted to grow less than 5,000 acres of sugar beets. This year, Great Western was forced to close its Lovell, Wyo., factory for lack of grower interest; its Goodland, Kan., plant is said to be operating unprofitably with only 7,200 acres on contract.
Beet sugar processing is ''far from what you call a highly profitable operation,'' says Don Swartz, vice-president of logistics at Spreckels Sugar Division of the Amstar Corporation. ''It's been a reasonable operation.''
''As long as the processors can hang in there, ... then there will be a stable production,'' adds David Carter, president of the United States Beet Sugar Association. But ''you're not going to see a dramatic increase over what you've got right now.''
In fact, the last sugar beet factory built in the United States was the $62 million Renville, Minn., plant, completed in 1975. The plant faces no financial squeeze, says general manager Irvin Zitterkopf, because it is owned collectively by the 310 growers of the Southern Minnesota Beet Sugar Cooperative.
Gradually, as higher-cost irrigated farms decline in the West, the upper Midwest is becoming the nation's predominant sugar beet industry, economists say.
Yet even here in Renville there is concern about the industry.
Next year, US sugar producers will have to make their case in Washington for extending the program of protective import duties and quotas. In the past, sugar legislation has been very controversial. And observers don't expect next year's debate to be anything less.
''There's going to be a heavy assault,'' says Robert Barry, project leader for sweeteners at ERS. ''There's not a basis for being smug.''
Sugar users and refiners, for example, hope to have the quotas eliminated. They would much rather buy sugar at the world price of about 4.5 cents a pound than domestically at 21.5 cents. Last year, the higher protected price forced American consumers to pay an extra $3 billion for sugar and products containing sugar, they estimate.
According to one source, who asked not to be named, even domestic producers acknowledge that sugar support prices are too high. The producers talk privately of cutting a couple cents off the support price of 17.75 cents a pound proposed for this year, this source said.
But producers here in Renville say some form of government protection is needed if the bulk of the industry is to survive.
''Without legislation you would lose half of what's there,'' says Mr. Zitterkopf. Foreign governments are subsidizing their own sugar producers. ''There isn't anyone in the world that can produce 5-cent-a-pound sugar.''
''I don't feel a country should buy all its sugar overseas,'' says Lamb, prodding one of his oversized beets with a muddy boot.
''I think we can raise sugar at a reasonable price for the consumer.''