A new report from CoBank’s Knowledge Exchange Division details the market forces and production dynamics that suggest the sugarbeet industry is well-positioned for a financial rebound, as consumer demand for sugar remains high.
“Assuming we return to reasonably normal harvest weather this fall, expectations are for a much bigger crop to be harvested for the 2020-21 season,” said Tanner Ehmke, manager of CoBank’s Knowledge Exchange. “With processors contracting refined sugar at much higher prices, fortunes are expected to turn favorable for growers and processors in the marketing year ahead.”
The U.S. sugarbeet harvest last fall marked the fifth biggest year-over-year decline on record, dropping 14% to 28.6 million short tons. Production in three major sugarbeet-producing states, Minnesota, North Dakota, and Nebraska, fell more than 20%. Abandonment rates nationwide skyrocketed to the highest level since the Great Depression with 13.5% of U.S. planted acres not harvested due to ongoing wet weather issues. Yields also fell to the lowest level in five years due to late planting and poor harvest conditions.
Many U.S. sugarbeet growers financed their spring crop planting with crop insurance indemnity payments and financial aid from USDA while processors struggled with less throughput and lower extraction rates amid high fixed costs.
Wet field conditions this spring have hampered planting efforts for sugarbeet growers. However, total acreage planted is expected to increase over last year and drive production higher. USDA’s Prospective Plantings report forecast U.S. sugarbeet acreage at 1,138,500 acres for 2020, an increase of 6,500 acres compared to 2019.
Ultimately, total acreage will likely be revised upward with farmers expected to make up for lower yields to fulfill their shares of contracted beet production with processors. USDA is currently predicting the 2020-21 sugarbeet crop harvest to increase 18% year-over-year, landing at 33.7 million short tons, assuming a return to normal harvest weather this fall.
With demand remaining strong and refined sugar supplies tightening, the price of Wholesale Refined Beet Sugar has surged to 44 cents per pound, up from 35 cents per pound last fall and the highest since 2012. Raw sugar prices, though, have held steady at around 25 to 27 cents per pound for over the past two years.
COVID-19 has had minimal impact on total demand for sugar in the U.S. While total sales to sugar buyers in the food service sector has suffered due to the loss of customers, retail sales to consumers during the pandemic has skyrocketed.
“With processors contracting an expected large crop in today’s strong price environment, cooperatives are expected to be in a much-improved financial position, enabling them to reinvest proceeds to make plant upgrades and disburse more back to co-op members,” said Ehmke.