Surge in global prices benefits local beet growers
FARGO - It's the sweetest recipe sugar industry leaders say they could ask for. Mix strong harvests locally with poor ones elsewhere and add a generous dose of demand. The result is the highest global price for sugar the industry has seen in more...
FARGO - It's the sweetest recipe sugar industry leaders say they could ask for.
Mix strong harvests locally with poor ones elsewhere and add a generous dose of demand.
The result is the highest global price for sugar the industry has seen in more than 30 years.
Sugar hit 40 cents per pound last week, the highest price since October 1980, according to The Associated Press.
That surge means a rare and beneficial opportunity for the Red River Valley - home to hundreds of local sugar beet growers and Moorhead-based American Crystal Sugar Co., which processes the sugar beets.
"This is a nice situation to be in," American Crystal President and CEO David Berg said. "Sometimes it doesn't happen in a person's lifetime, but it's happened this year."
Supply and demand in the world sugar market is the main reason for higher prices, he said.
A series of disasters in Australia's sugar-cane region and foul weather in Brazil, India and China have decimated supply and driven up sugar prices worldwide.
At the same time, demand for the sweetener continues to rise as people living in blossoming economies such as China and India crave more sugar in their diet, Berg said.
Typically, companies in the United States such as American Crystal are insulated from the ebb and flow of the world market, but not this year, Berg said.
"Because the world market has taken off like it has, that's pushed up the domestic market, too," he said.
The U.S. gets about half of its sugar from sugar cane and the rest from sugar beets, The Associated Press reports.
Minnesota is the top sugar beet-producing state in the nation, with more than 10 million tons of sugar beets harvested from 442,000 acres in 2009.
USDA import quotas have kept the domestic raw sugar price relatively stable for decades at a level higher than the world average.
The U.S. price has been about 20 to 22 cents per pound since the early 1980s, while worldwide, the price has swung from 6 to 21 cents a pound just in the past decade.
Last year, the New York price rose to an average 34 cents a pound.
The high prices are a plus for business in the Red River Valley, which spawned a bountiful sugar beet crop last fall.
Because that crop has already been sold, local growers aren't yet seeing an impact from the higher global prices, said Nick Sinner, executive director of the Fargo-based Red River Valley Sugarbeet Growers Association.
"But if the strong market remains, that's nothing but a favorable outcome for our growers," Sinner said.
The trickle-down impact from world prices will ultimately affect everyone, from processers to farmers - and it isn't just the result of good luck. Berg said.
"It's hard work, that's what it is," he said.
Even though the oven seems to be hot for the sugar industry, the tendencies of a world market can be fickle.
A week ago - about two days after Berg was beaming about the highest price in 40 years - he had new information to share.
"The world market had an awful day on Thursday (Feb. 3), losing about 10 percent of its value," he said.
It didn't mean devastation, but, "some of the air has been let out of the balloon," he said then.
By earlier this week, the price had bounced back somewhat and still remained well above average, Berg said.
On the downside, however, The Associated Press reports that the high sugar prices could hit candy makers - and consumers' - pocketbooks this Valentine's Day.
Small companies are most quickly affected by the price increases because they frequently buy small amounts of sugar, said Susan Smith, spokeswoman for the National Confectioners Association.
A candy maker in New Orleans told the AP she'd had to raise her prices for the first time in eight years to cope with the rising costs for sugar.
The Forum of Fargo-Moorhead and the Herald are both Forum Communications Co. newspapers.