You can almost hear the economists clucking, “If Louisiana sugarcane producers can't compete, they ought to be growing something else or selling their land and putting the money in CDs.”
Well, as often is the case in agriculture, it isn't that simple. Why should Louisiana growers have to give up a way of life so that candy companies can give shareholders a few more cents in dividends or so that some foreign country can create a sugarcane industry with subsidies and high tariffs?
It's no secret that the world has too much sugar, says Dean Gravois, a sugarcane producer from Vacherie, La., who spoke on the “Sugar Policy Needs of Louisiana Cane Growers and Processors” at the USDA Outlook Conference. For several years, Louisiana has been producing more sugarcane because of acreage increases and a new sugarcane variety that allows growers to harvest five and six years on one cane planting. But, the rest of the world has been producing more sugarcane, as well.
“To the outside observer, the answer to this crisis, at least for the individual farmer, should be simple: grow something else,” says Gravois. “That's supposed to be the most appealing aspect of Freedom to Farm, isn't it? Choose another crop. Find something that provides the stability and revenue that sugar cannot provide.
“Yet, for the Louisiana sugarcane farmer, there is no flexibility. Growing sugarcane is what we do best. More than that, sugarcane is the only crop those of us in south Louisiana are able to grow successfully.”
Gravois said farmers in his area have tried other crops, including rice, soybeans, cotton and corn. But, due to the uniqueness of its soil and climate, especially its weather extremes, sugarcane has been the only crop farmers in Cajun Country have been able to grow effectively.
“It is perhaps ironic then that a significant reason for the increased production in Louisiana has been the influx of acreage in the western and more central portions of our state that have traditionally been devoted to growing rice and soybeans,” says Gravois.
“As prices for these other commodities fell, these farmers began searching for other crops, any crop, with which they could get some productiveness out of their land.
“So, they took AMTA and marketing loan payments received for other crops and used them to enter the sugar business.”
More plantings and the introduction of the new variety, LCP85-384, led to a 75 percent jump in Louisiana sugarcane production in recent years.
“This type of production increase and subsequent efficiency are what our government and our detractors contend we should be doing to be more competitive,” says Gravois. “Well, we're there! And what do we get for it — no price!”
The higher yields and the lodging that can occur with the heavier new cane variety have forced producers to put more money into harvest systems — about $500,000 for a combine harvester, high dump transport wagons, tractors and highway transport trailers — for an industrywide investment of about $200 million.
“Without the enhanced efficiency that the new variety and harvesting system offer, we could not survive,” Gravois notes. “As long as production outstrips demand, nationwide and worldwide, and as long as pressure from imports sits on our market like an 800-pound gorilla, the only way our industry can survive is to lower production costs.”
Part of the equation is that sugarcane mills must also become more efficient, requiring more and more cane to grind.
“Thanks to this new variety, and the years of research and millions of dollars needed for its development, our farmers can meet these mills' growing need for more cane,” he said. “Yet, research such as this is only part of the high investment required to produce sugar from cane, and is only one facet of an integrated network that comprises our community.”
Gravois says the survival of every local farmer, and his commitment of cane, is crucial to the survival of the mill. “If even two farmers in a growing area go out of business or, if they're able, use their land for some other purpose, the stability of the mill begins to weaken.
“If the price of raw sugar falls lower, and a larger fraction of farmers goes out of business, the mill can lose enough cane supply, that it, too, will slip under. At that point, the remaining farmers must find another place to grind their cane, resulting in higher transportation costs and greater deterioration rates of cane.”
For some mills and many farmers, he said, the squeeze between costs and price has been too tight. “We have already lost three mills in Louisiana since 1995, and are destined to lose more mills in the near future.”
Despite those dire straits, opponents continue to heap criticism on the U.S. sugar program, asking why the United States shouldn't open its market completely to foreign sugar under the tenets of Freedom to Farm.
“The simple answer is that while we may wish for a free market within our country, there is and never has been a free and unfettered global market in sugar, and that is a shame,” says Gravois. “I believe in a free market and so do my colleagues. That is why we were the first to support genuine, multilateral free trade at the outset of the Uruguay Round negotiations.”
But, few of its competitors are willing to risk sharing that sentiment. Nearly every one of the 130 countries that produces sugar supports its industry in some way with export subsidies, production subsidies, state trading enterprises or financing subsidies.
“The accumulated result of all of these foreign subsidies is a world dump market that bears no resemblance to a free market,” he noted. “The world price averages barely half of the world's average cost of production, which is why none of our trading partners who target our market are willing to open their own borders.”
Until the global market is truly free, U.S. farmers need a sugar policy that is both realistic and fair, says Gravois. “We must find a way to balance supply and demand, and we must find a way to reward efficient American production rather than foreign subsidized production.”