FARGO, N.D.–Those attending the 51st annual International Sugarbeet Institute in Fargo learned they will be facing challenges on several fronts ranging from low prices to the lack of a farm bill, during the coming year.
That was the main thrust of the message delivered by Luther Markwart, executive vice president of the American Sugarbeet Growers Association and one of the keynote speakers at the institute.
In terms of agreeing on a farm bill, Markwart said there are four major issues that need to be resolved in addition to how to handle the sugar portion of the bill.
* How much money needs to be cut out of this farm bill?
Cuts to the Supplemental Nutritional Assistance Program (food stamps) - this has become a huge fight between the urban Democrats and those with agricultural interests and the Republican members.
* Supply management in the dairy portion of the bill.
* The design of the commodity title - last year the Senate version of the farm legislation was favorable to some Southern crops like rice and peanuts, but Markwart figures there will be changes this time around that will strike a better balance, since there is now a Southern influence on the Senate Ag Committee.
* The never-ending sugar debate on the floor of the House and Senate, which he feels will be a fierce fight this year.
Markwart said realistically, the farm bill should be called the "food bill with a little bit of farm added," since 80 percent of the spending goes to nutrition programs. On the agriculture side, 6 percent goes for commodity titles, 6 percent to conservation programs and 8 percent to federal crop insurance.
And even though cutting costs is the main focal point, nutrition programs have ballooned in the past three years.
"When the economy collapsed in 2008 were we at $39 billion and since then we have gone to $82 billion. So in a very short time it literally doubled," Markwart said. "That's why many members say if they are going to cut spending you have to go back and go after the food stamps."
Funding a farm bill this year will also be more difficult than last year, since they will have a baseline of $10 billion less to work with now. This means those crafting the new farm bill will have $30 billion less to work with after the expected $20 billion budget cut is added in.
Passing a new farm bill will also be a challenge with the new Congress, he noted. Both bodies have several new members who have never been involved in debates regarding farm programs and sugar legislation. The Senate has 10 new members and 187 House members have never been involved in a floor vote on a farm bill or sugar.
"You virtually have half of the House of Representatives that has never voted on a farm bill, which is scary because you don't have the institutional memory for these policies," he said.
This is a reason for concern in the sugar industry since periodic efforts by Congress to dismantle the sugar program are failing by smaller margins each time a vote is taken. The concern is heightened this time around with an expected concerted effort by sugar consumers to get rid of the sugar program after they experienced a 71 percent increase in sugar prices during the last two to three years.
"(This increase in price) shifted close to $3 billion a year from the users to your side of the ledger," he told the growers. "That helped you pay off a lot of debt, replace a lot of equipment and do all those very good things. But, what it did was it stirred all of the users in all of the congressional districts."
Bottom dropped out of sugar prices
During the past three years, sugar prices have been at extremely high levels due to droughts in some major production areas of the world that resulted in extremely tight inventories. However, that situation has started to reverse itself and those prices have plunged from those high levels to a point where they are approaching "forfeiture" levels, which means sugar processors can forfeit sugar to the government when prices fall to a certain low level.
What led to this collapse of domestic sugar prices?
About this time last year Agriculture Secretary Tom Vilsack was under tremendous pressure from the industries using sugar in this county to import up to a million pounds of sugar in an effort to bolster the short supplies in this country. At that time ag officials were working with a new free trade agreement with Mexico, and the amount of sugar they planned to send to the U.S. would be used in the formula to determine how much additional sugar Vilsack would allow to enter the country.
The Mexican government informed the U.S. they intended to ship around 700,000 tons of sugar into the U.S. and based on that information Vilsack decided to allow 450,000 tons of additional sugar into the country. Shortly after that decision was announced, the Mexican government decided to up the amount of sugar they would send to the U.S. to over a million tons and the stage was then set for declining prices.
The brakes were taken off falling prices with the bumper sugar crops both beet and cane producers experienced in 2013.
"So the administration is looking at different kinds of options, trying to figure out how we can avoid forfeitures; how can we get this market back in balance?" he said. "That is the process that is under way.