Spring is Here, Bringing Sugar Forecasts
Column authored by Dr. Robert Johansson, Associate Director of Economics and Policy Analysis at the American Sugar Alliance.
The vernal equinox, aka spring equinox, came and went Saturday, March 20, marking the end of winter and the beginning of spring.
As all good aggies know, that means the economists at the Food and Agricultural Policy Institute (FAPRI) at the University of Missouri just published their new 10-year baseline for agricultural production and programs.
That baseline is adjusted by University of Missouri economists to reflect more recent 2021 prices and economic conditions compared to the earlier USDA’s baseline published in part in November and in full in February.
From a sugar perspective, the equinox also marks the tail end of the sugarcane harvest (with some acres left to harvest yet in Florida) and the beginning of sugarbeet planting in 10 states and the sugarbeet harvest in southern California. Taking stock:
- we expect a record sugarcane harvest at 4.24 million tons in 2020/21, despite the multitude of tropical storms battering Gulf Coast shores last year; and
- we could see a record year in 2021/22 for sugarbeets, currently forecast by FAPRI at more than 5.13 million tons.
With the larger than expected 2020/21 production for both beet and cane along with imports mandated by trade agreements, the current USDA forecast projects a more than adequate supply of sugar to fulfill our nation’s needs.
Looking forward, FAPRI expects overall sugar demand to grow by more than 1.3 million tons over the next 10 years. That demand growth is roughly twice the expected growth in domestic production, but U.S. sugar policy gives 41 countries, most of them developing nations, preferential access to our market to ensure that consumers always stay stocked with sugar. In fact, the U.S. is the third largest sugar importer in the world. That should keep domestic prices at roughly the same levels over the next 10 years.
While FAPRI does not explicitly discuss government program costs for sugar, USDA projects a sugar program cost of $0 for taxpayers over the next 10 years.
However, with any good economic forecast there are both positives and negatives. An area worth keeping an eye on is rising costs of production. Both FAPRI and USDA expect agricultural costs of production to continue to increase over the next 10 years. FAPRI has costs rising by 19% and USDA has costs rising by 12% over the baseline period. For producers in all sectors, who face flat prices and rising costs of production, it is likely we’ll see additional borrowing as margins get squeezed. And, indeed, FAPRI projects overall debt-to-asset ratios creeping up to 15.6% by 2030 (which would be the highest since 1991 if realized).
In the face of rising input costs and flat prices, it is critical that Congress continue to back a strong no-cost sugar policy in order to support an essential domestic industry and maintain a safe and reliable supply of quality sugar.