La.’s sugar cane industry keeps wary eye on Mexico

Louisiana’s sugar cane industry can only hope Mexico keeps its word in 2014 and sells its surplus sugar outside the U.S., where 2.1 million tons of Mexican sugar in 2013 sent American sugar prices to record lows and made it tough for farmers to make a living.

Jack Roney, director of economics and policy analysis for the American Sugar Alliance, said Mexico will have to better manage its sugar production to prevent price collapses there and in the U.S.

The price per pound of sugar sits at around 20 cents, a 30-year low that will not fall any lower because of U.S. government price supports that have kicked in.

Louisiana sugar cane farmers should be sitting pretty: Louisiana’s 483 farming operations produced 1.59 million tons of raw sugar in 2013, second only to 2012’s best-ever crop. But the farmers and millers this year are taking their sugar into a market that has too much sugar, a market that has to absorb what U.S. trade policy has allowed into the country.

In 2012, farmers fetched 30 cents a pound; in 2011, the price was 34 cents. The price was stable and at a level where farmers and mills could make a profit.

“Farmers are facing 2014 costs and getting 1980s prices,” Roney said.

Roney said Mexico’s abundance of sugar comes from a flawed system in that country, a system that does not adhere to supply and demand laws and which encourages the government to take over sugar cane farms that are on the brink of financial ruin.

Roney said the Mexican government, which now owns farms that produce one-fifth of Mexico’s raw sugar output, takes over the farms to keep farm employees working and to quell possible civil unrest.

In the U.S., sugar farmers and mills also get help from the government, such as this year’s price supports. It’s the first time in years that sugar prices have fallen to the threshold level of 20 cents a pound and price supports have been instituted.

“We’re all about free markets,” said Jim Simon, head of the American Sugar Cane League.

“We would love for there to be nothing but free-market-traded sugar,” he said. “But that would mean that all of the other producing countries would have to drop their subsidies before we stop ours.

“We’re not going to unilaterally disarm and put our growers at risk of trying to compete against the government of Mexico, the government of Brazil, the Indian government,” Simon said.

Mike Salassi, an agriculture economist with LSU AgCenter who specializes in sugar cane, said the price will be low for a while.

“The price will stay down where it is until we can get the sugar out of the market,” he said.

Farmers and millers also are fighting their biggest customers, Salassi, Roney and others said, because U.S. candy makers want the price to stay dirt-cheap. Though there are substitutes for sugar, when the price for the commodity stays low, the profit margins for candy makers stay fat.

“The sugar users, the candy and confectioners, want low sugar costs,” Salassi said.

In addition to Mexico, farmers in countries such as Brazil, Thailand and India rely on their governments to step in and save them when they produce too much, including Brazil, Thailand and India.

The burden for the U.S. farmers is to try to stay afloat.

“We’ll be able to weather this process but not for an indefinite period of time,” Simon said.