ASA Symposium 2009: Farm Bill Implications
One Topic of Discussion at ASA Symposium
The Farm Bill, Mexico and the Obama administration were major topics of discussion at the 26th Annual International Sweetener Symposium, held at Canyons Resort in Park City, Utah, in August. Speakers ranged from U.S. Congressmen to media to confectioner and soft drink reps, and even the USDA Under Secretary.
The symposium will again convene in 2010, at the Vail Marriott Mountain Resort and Spa in Vail, Colo., July 30 through August 4.
Food Company Profits Soar, Not Growers'
Sugar market disparities have created profits for food manufacturers, higher prices for grocery shoppers and worries for many sugar farmers since August of last year, according the annual Sugar Price Survey.
According to the report, the past year has seen shoppers paying more for a bag of refined sugar-from 52.5 cents per pound last July to a high of 57 cents in March 2009. Price hikes can be attributed to the widening gap between the retail prices grocery stores charge and the wholesale prices that the grocery stores pay to purchase the sugar.
Furthermore, "[A] 99-cent candy bar with a penny's worth of sugar would still cost 98 cents even if candy companies got the sugar for free," the study concluded.
Candy Co.'s Fleeing For Cheaper Labor
The large candy company that recently relocated operations from Pennsylvania and Canada to Mexico did so to save on overhead expenses. Ingredient costs, such as sugar, changed very little, according to a new study by former USDA official Peter Buzzanell.
Buzzanell listed candy company wages at $18.78 an hour and yearly healthcare costs at $7,680 per worker in Pennsylvania. That plummets to 51 cents an hour and $258 per worker for healthcare in Mexico. Rent costs and sewage bills are also much lower south of the border.
Despite the increased profits, Buzzanell believes candy company flight to low-wage countries "has run its course and that trend of job loss may be reversing itself."
Sen. Conrad Updates Producers
Calling the U.S. sugar industry a "multi-billion dollar economic engine," Senator Kent Conrad (D-ND) updated participants on numerous budget and trade issues, including loopholes in NAFTA.
The loophole Sen. Conrad referenced allows Mexico to turn a handsome profit by sending the sugar it grows to America and then importing cheaper, subsidized sugar from other countries to meet its domestic needs.
Sen. Conrad, chairman of the Budget Committee, spoke of numerous budget items that could affect farmers from coast to coast.
The farm safety net passed in the 2008 Farm Bill is unlikely to be trimmed during budget tightening measures, he explained, noting that the 2008 Farm Bill already included steep cuts for agriculture.
World Sugar Unpredictable, U.S. Stable
After two years of large statistical surpluses, the world sugar market has "entered a distinct deficit phase," said International Sugar Organization executive director Peter Baron.
Worldwide sugar supplies are at their tightest level since 2005/06, Dr. Baron said, because of "significant shortfalls in India and China, as well as a further contraction of production in Europe."
The market rollercoaster is not a surprise to ASA economist, Jack Roney, but American consumers have nothing to fear. U.S. sugar policy helps stabilize domestic supplies and prices and is designed to operate with little to no cost to the taxpayer.
Mexican Wildcard Makes USDA Job Harder
The year 2009 has proven to be a difficult year for USDA analysts charged with forecasting the U.S. sugar market, according to USDA economist Barbara Fecso. Imports from Mexico were one of the biggest factors leading to this year's market uncertainties, she said.
In August of last year, the USDA projected Mexican sugar shipments would reach 500,000 metric tons this crop year. Actual shipments are more than double that amount, 1.18 million tons.
The disparity is a direct result of the NAFTA loophole spoken of by Sen. Conrad.
Despite the lessons learned from last year, large food manufacturers are again aggressively lobbying USDA officials to allow as much as 1 million tons of additional sugar onto the U.S. market.
Farmers Make Less, Shoppers Pay More
Consumers are paying more at the checkout line-seven percent more according to Bureau of Labor Statistics data from 2006 to 2008.
But America's growers and ethanol producers aren't the culprits, Growth Energy CEO Tom Buis said. In fact, crop prices have dropped like a rock in recent months, he explained, but food manufacturers are still charging more to boost profits.
Stark examples aren't just isolated to corn, according to Luther Markwart of the American Sugarbeet Growers Association.
"The ASA released a study [that week] that showed the huge divide between the price grocery stores charge for sugar, and the price they pay sugar companies to deliver the sugar right to their front doors," he said. "They're charging almost double for literally stocking the sugar on the shelf."
"Food manufacturers are spending less on sugar today than they were in 1980," Markwart concluded.
USDA: No TRQ Increase Right Now
U.S. sugar producers and industrial sugar users listened intently to USDA Under Secretary Jim Miller. He said there would be no announcement yet regarding the Department's decision whether to allow additional sugar imports into the market.
Large candy companies have engaged in a months-long lobbying campaign to pressure the USDA to increase the TRQ in hopes of boosting their profits.
Miller explained that the USDA is still reviewing the situation, and he would not rule out a TRQ increase at a later date. U.S. sugar producers applauded this cautious approach given the potential taxpayer cost associated with a TRQ increase and the tremendous uncertainty overhanging the market as a result of unpredictable sugar supplies coming in from Mexico.
He also addressed other domestic and international policies that affect the U.S. sugar industry. On trade, the Under Secretary said, "The real problem we have in sugar is a global market that's distorted," noting that fair trade is a priority of the new Administration.
Sen. Crapo: Mexico Issues Must Be Addressed
Trade with Mexico remains one of the biggest challenges facing U.S. sugar farmers and must be addressed, said Sen. Mike Crapo (R-ID) via video conference.
Mexico should not be allowed to sell its sugar in America then import subsidized dump market sugar to turn a profit and fill shortfalls created by exporting too much to the United States, he explained.
He also said it is imperative for the governments of the two countries to come together to improve data collection in Mexico so officials have a better understanding of supply and demand conditions in the North American sweetener market. USDA officials expressed similar views about the need for better information when speaking to the group yesterday.
If issues with Mexico can be resolved, U.S. sugar producers might be in a better position to offset climbing input costs, he said, noting that sugar prices have remained virtually flat for the past two decades.
Lucas Doubts Fair Doha Conclusion
U.S. trade negotiators will have a difficult time rebalancing World Trade Organization talks to benefit America's farmers, Congressman Frank Lucas, the ranking member of the House Agriculture Committee said.
Farmers and ranchers voiced their concern last year with President George W. Bush about the direction of WTO negotiations. They recently reiterated their position to President Barack Obama, claiming U.S. agriculture would be on the losing end of the current Doha deal under consideration.
The agreement currently on the table would weaken the 2008 Farm Bill while resulting in very little market access for U.S. agricultural products around the world, said Don Phillips, the American Sugar Alliance's trade advisor.
Trade Agenda Atop Growers' Minds
Implementation of the 2008 Farm Bill, shrinking profit margins in agriculture and belt-tightening in Washington dominated discussion at the symposium, but growers are still keeping an eye on international matters, according to a panel of trade experts.
"Doha is done. It's time for reality to sink in that, after eight years, there will be no deal," said the National Farmers Union's Katy Ziegler Thomas, one of the panelists.
World leaders, including President Barack Obama, recently set a deadline of 2010 to conclude the ongoing Doha Round of World Trade Organization negotiations.
"As it stands now, the U.S. is on the losing side of this negotiation-especially America's farmers," Phillips explained.
This same observation was spotlighted in an article this week on FarmPolicyFacts.org written by former House Agriculture Committee Chairman, Larry Combest.
"The trade agenda put forward by the President early this year made clear that to conclude Doha, the imbalance in the negotiations, tilted against the U.S., must be corrected," he wrote.
Sugar Sales Growing, Supplies Stable
Sugar sales have climbed at the expense of high fructose corn syrup (HFCS), Ron Sterk, associate editor of Milling & Baking News and Food Business News, told attendees.
New food and drink products with HFCS as an ingredient that were introduced in 2008 were down 18 percent from 2007 and down 22 percent from 2006, and the trend appears to be continuing in 2009.
Some companies have even, "added `HFCS is not an ingredient' to labels, as with trans fats, adding to negative perception," Sterk said. Among the companies he listed as "dumping HFCS from all or some items" are: Snapple, Starbucks, Kraft Foods, Del Monte, Dannon and "more almost weekly."
Brian O'Malley, president and CEO of Domino Sugar, told the group that the shift in sweeteners has been a welcomed surprise that's helped offset a flood of imported sugar from Mexico.
Challenges Face America's Growers
While the 2008 Farm Bill has given America's growers a much-needed safety net,
they continue to face many challenges in today's business and media environment, according to a panel of experts.
Lower commodity prices, higher input costs and a global economic malaise are just a few of the challenges farmers continue to face. They'll also have to confront attacks from some old foes, too.
Attacks from environmental community and regulators will be one of rural America's greatest near-term challenges, says Mary Kay Thatcher, director of public policy with the American Farm Bureau Federation.
Former House Agriculture Committee Chairman Larry Combest, who was a panelist, said it's exactly the kind of effort commodity agriculture has needed for years and applauded its supporters and members.
Editor's note: To read the entire report go to the Sugar Producer website at www.sugarproducer.com and click on the Beetbox.