Montana, Wyoming sugar economy should benefit from dispute settlement

Published online: Jan 10, 2015
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Montana and Wyoming sugarbeet farmers should benefit from a newly resolved trade dispute between the United States and Mexico, according to an industry official.

Prices for U.S. sugar have been in a slump for the past two years, partly because shipments of Mexican sugar to the United States have created an excess of the sweetener.

The federal government concluded several months ago that Mexico was “sugar dumping,” that is, shipping large volumes of subsidized sugar to the United States. The ruling came after U.S. sugarbeet and cane farmers, including those in Montana and Wyoming, submitted a petition calling for an investigation. The sugar business is worth roughly $100 million to the Montana economy.

The U.S. Department of Commerce began slapping cash penalties on Mexican sugar for dumping and subsidies as a result of the investigation. Shortly before Christmas, the two countries agreed to terms designed to stem overflow of subsidized Mexican sugar to the United States. The agreement sets a minimum price at which the Mexican sugar can be sold to U.S. companies, namely large confectioners and bakeries. It also puts limits on volume.

“By putting a minimum safety net price in, and making sure we balance the market, that should make the future for prices to growers bright. That’s about as technical as you want to get,” said Luther Markwart, American Sugarbeet Growers Association executive vice president.

On Jan. 7, Markwart met in Billings with 250 sugarbeet growers from Wyoming and Montana. He offered a Cliff’s Notes version of the U.S.-Mexico agreement that involved no fewer than three federal government agencies who don’t usually work together on sugar trade. The deal also involved bringing several members of Congress up to speed on an industry to which few lawmakers pay attention.

“The Mexican government owns nine sugar mills. This shocks a lot of members of Congress,” Markwart said. “They go, ‘What kind of subsidy are they getting?’ Subsidy? The government owns them. So when you’re competing in a North American market and you’re taking on (Mexican sugar) you’re taking on the government of Mexico.”

It’s unclear how much the U.S.-Mexico agreement will affect sugar prices. Markwart couldn’t put a number on it, though U.S. sugar for March delivery was selling for just less than 24 cents a pound Jan. 7.

If sugar prices dropped a couple cents a pound, the U.S. government would be faced with accepting sugar as payment from domestic processors on government-backed loans. Western Sugar Cooperative, which has factories in Billings and Lovell, forfeited sugar in 2013 as the price of the sweetener dropped below 22 cents a pound. Several processors did the same, collectively defaulting on more than $140 million in loans in 2013. Since 2008, the federal government has been required to accept the sugar at above market value and then sell it as a raw ingredient to biofuel companies.

The real upward influence on U.S. sugar prices would be a shortage in global supply, said Gary Brester, Montana State University agriculture economist. Shortages in the world sugar supply boosted prices in 2009 and 2010. U.S. sugar usually sells for more than the global prices because foreign sugar imports to the United States are regulated, which stabilizes supply. Mexican sugar is an exception to the rule because of the North American Free Trade Agreement.