RUPERT • Idaho sugar beet acreage is on the decline. That’s because sugar beet yields are on the rise.
It’s not the usual supply-and-demand scenario, but it’s how the Farm Bill’s sugar program works.
In order to stabilize the volatile price of refined sugar, the U.S. Department of Agriculture uses domestic marketing allotments, along with price supports and tariff-rate quotas, to control the amount of sugar available to the U.S. market.
The sugar program “is an agreement between growers and consumers, administered by the government, that assures a steady supply of sugar at a reasonable price to consumers,” said Duane Grant, chairman of the Snake River Sugar Co.’s board of directors. Snake River Sugar is the grower-owned cooperative that owns Amalgamated Sugar Co.
“Sugar is unique in how it’s managed,” Grant said. “The (USDA) monitors sugar consumption nationally and tracks the consumption year to year, then allocates 80 percent of domestic sugar consumption to the domestic sugar industry.”
Grant lives in Rupert and owns Grant 4-D Farms, which operates numerous farms in southern Idaho and eastern Oregon.
Randall Grant — no relation to Duane Grant — is president of the Idaho Sugar Beet Growers Association. He lives in Twin Falls and farms near Eden and Hazelton.
Sugar beets in the U.S. are now grown by co-ops, Randall Grant said.
“There are virtually no (independent) companies left,” he said. The industry “figured out the only feasible way for the growers to raise sugar beets was to buy the factories.”
Growers purchased shares in Snake River Sugar, and each share owned gives the grower the right to raise an acre of sugar beets for the co-op. Each share also obligates the grower to deliver a certain amount of beets to the co-op each year.
This dynamic diminishes the fluctuations seen in free markets. The obligation to grow a crop reduces sugar shortages caused by growers chasing higher profits from other crops; share limits reduce the risk of gluts in the U.S. sugar market that would otherwise drive down prices to growers.
The processing capacity of Amalgamated’s three sugar factories also limits the crop grown in a given year. The amount of beets grown must match the amount of beets that can be processed in a short time window.
“Beets are perishable,” Randall Grant said. The first of the crop is harvested in September. “We need to be done processing in March.”
The company is the second largest beet-sugar producer in the country and refines 2 billion pounds of sugar annually, Duane Grant said.
How Many Acres Does It Take?
“Back in 1997, when the cooperative first took control of Amalgamated Sugar, we raised 222,000 acres of sugar beets — predominately in Idaho and Eastern Oregon,” Duane Grant said. Today, with advances in technology, irrigation efficiency and genetically modified beet seed, the co-op raises the same quantity of sugar beets on 182,000 acres.
The number of shares in the company has dropped proportionately.
“During the (co-op’s) first five years, sugar prices were poor and many growers got out of the business,” he said. “(From) 2006 to 2008, it was similarly difficult. In many cases when a grower wanted to exit, there was not a willing buyer for the shares, so the exiting grower would forfeit his shares back to the cooperative.”
The co-op has issued no new shares since its inception, and the 182,000 remaining shares represent the total after forfeiture by those exiting the industry.
Opportunities to buy or lease sugar beet shares arise occasionally, Randall Grant said. Perhaps sugar beets may not fit into a grower’s rotation one year, but he still has the obligation to deliver his share of beets. He can lease his shares to another grower for a time, then start back up another year.
Or perhaps a grower wants to retire; he can sell his beet shares.
“Today there is very strong demand for any shares offered for sale,” Duane Grant said.